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Exam 3: The Financial Reporting Process

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Question 41

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The adjusted trial balance for China Tea Company at December 31, 2012 is presented below: Prepare the closing entries for China Tea Company for the year ended December 31, 2012.

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Question 42

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The following financial information is from Shovels Construction Company for 2012: $\begin{array} { | l | r | } \hline \text { Accounts Payable } & \$ 15,000 \\\hline \text { Buildings } & 80,000 \\\hline \text { Cash } & 10,500 \\\hline \text { Accounts Receivable } & 9,500 \\\hline \text { Sales Tax Payable } & 4,500 \\\hline \text { Retained Earnings } & 47,500 \\\hline \text { Supplies } & 40,000 \\\hline \text { Notes Payable (due in 18 months) } & 35,000 \\\hline \text { Interest Payable } & 3,000 \\\hline \text { Common Stock } & 35,000 \\\hline\end{array}$ What is the amount of current assets, assuming the accounts above reflect normal activity?

A) $20,000.
B) $60,000.
C) $140,000.
D) $175,000.

E) B) and C)
F) B) and D)

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Question 43

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Consider the following events for Sophia Incorporated: Under accrual-basis accounting, what is the appropriate day to record the expenses related to the sand volleyball camp?

The closing entry for revenue accounts includes a debit to Retained Earnings and a credit to all revenue accounts.

Which of the following accounting principles states that expenses are recognized in the same period as the revenues they help to generate?

Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the correct term by placing the letter designating the term in the space provided. Terms: -____ A list of only permanent accounts and their balances prepared to prove that total debits equal total credits

The following events pertain to Bills Company: Using accrual-basis accounting, on which date should Bills Company record revenue for the accounting and tax services?

Permanent accounts would not include:

A customer purchased a drill press on November 14 on account from Sears. The drill press was delivered two weeks later. The customer paid for the drill press on December 5. When should Sears record the revenue for this transaction according to the revenue recognition principle?

Suppose a company rents office space for one year, paying $12,000 ($1,000/month) in advance on September 1. Record the adjusting entry on December 31.

Under cash-basis accounting, the timing of cash inflows and outflows exactly matches the reporting of revenues and expenses in the income statement.

A company purchases new equipment for $24,000 cash on August 1, 2012. At the time of purchase, the equipment is expected to be used in operations for four years (48 months) and have no resale or scrap value at the end. The company depreciates the equipment evenly over the 48 months ($500/month). Record the adjusting entry for depreciation on December 31, 2012.

Which of the following accounts will NOT be involved in closing entries?

Suppose Simeon Company begins the year with $1,000 in supplies, purchases an additional $5,500 of supplies during the year, and ends the year with $700 in supplies. The year-end adjusting entry includes Supplies Expense of $7,200.

Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the correct term by placing the letter designating the term in the space provided. Terms: -____ Financial statement showing that assets equal liabilities plus stockholders' equity.

Adjusting entries are unnecessary for transactions that do not involve revenue or expense activities, such as selling common stock or paying dividends.

The following events pertain to Jasper Corporation: Using cash-basis accounting, on which date should Jasper record supplies expense?

The revenue recognition principle states that:

The following table contains financial information for Trumpter's Inc. before closing entries: $\begin{array} { | l | r | } \hline \text { Cash } & \$ 12,000 \\\hline \text { Supplies } & 4,500 \\\hline \text { Prepaid Rent } & 2,000 \\\hline \text { Salaries Expense } & 4,500 \\\hline \text { Equipment } & 65,000 \\\hline \text { Service Revenue } & 30,000 \\\hline \text { Miscellaneous Expense } & 20,000 \\\hline \text { Dividends } & 3,000 \\\hline \text { Accounts Payable } & 5,000 \\\hline \text { Common Stock } & 68,000 \\\hline \text { Retained Earnings } & 8,000 \\\hline\end{array}$ What is the amount of Trumpter's total liabilities?

The Supplies account is an example of an accrued expense.