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Exam 3: The Financial Reporting Process

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Question 81

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The adjusting entry for an unearned revenue always includes a debit to an asset account and a credit to a revenue account.

A) True
B) False

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Question 82

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A company pays its employees $5,600 every two weeks ($400/day). The current two-week pay period ends on December 26, 2012, and employees are paid $5,600. The next two-week pay period ends on January 9, 2013, and employees will be paid $5,600. Record the adjusting entry on December 31, 2012.

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Salaries Payable2,00...

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Question 83

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Permanent accounts would not include:

Making insurance payments in advance is an example of:

Which accounting principle states that a company should "record revenues when they are earned"?

Yummy Foods purchased a one-year hazard insurance policy on August 1 and recorded the $4,200 premium to prepaid insurance. At its December 31 year-end, Yummy Foods would record which of the following adjusting entries?

A list of all accounts and their balances after updating account balances for adjusting entries is referred to as:

Prepare adjusting journal entries, as needed, for the following items. (a) The Supplies account shows a balance of $500, but a count of supplies reveals only $200 on hand at year-end. (b) The company initially records the payments of all insurance premiums as prepaid insurance. The unadjusted trial balance at year-end shows a balance of $500 in Prepaid Insurance. A review of insurance policies reveals that $100 of insurance is unexpired. (c) Employees work Monday through Friday, and salaries of $2,500 per week are paid each Friday. The company's year-end falls on Tuesday. (d) At year-end, the company received a utility bill for December's electricity usage of $200 that will be paid in early January.

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

What is the difference between permanent accounts and temporary accounts and why does an accounting system have both types of accounts?

Which of the following is true concerning temporary and permanent accounts?

The following data are taken from the cash-basis accounting records of Myerson Company for the year ended December 31, 2012: $\text { Selected Data as of December 31, } 2012$ $\begin{array}{lr}\text { Customers billed in 2012 for services provided } & \$ 400,000 \\\text { Cash collections in 2012 for accounts billed in 2011 } & 20,000 \\\text { Cash collections in 2012 for accounts billed in 2012 } & 300,000 \\\text { Cash paid for supplies purchased in 2012 } & 12,000 \\\text { Supplies remaining at the end of } 2012 & 2,000 \\\text { Cash paid for salaries in 2012 } & 10,000 \\\text { Cash paid for annual rent on March 1, 2012 } & 18,000\end{array}$ Calculate the amount of revenues and expenses for 2012 under accrual-basis accounting.

The following financial information is from Bronco Company. All debt is due within one year unless stated otherwise. $\begin{array} { | l | r | } \hline \text { Retained Earnings } & \$ 52,000 \\\hline \text { Supplies } & 37,000 \\\hline \text { Equipment } & 72,000 \\\hline \text { Accounts Receivable } & 8,600 \\\hline \text { Unearned Revenue } & 6,000 \\\hline \text { Accounts Payable } & 15,000 \\\hline \text { Common Stock } & 25,000 \\\hline \text { Notes Payable (due in 18 months) } & 35,000 \\\hline \text { Interest Payable } & 7,000 \\\hline \text { Cash } & 22,400 \\\hline\end{array}$ What is the amount of current liabilities?

Adjusting entries are not necessary when cash is paid at the same time expenses are incurred.

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

According to the revenue recognition principle, if a company provides services to a customer in the current year but does not collect cash until the following year, the company should report the revenue in the current year.

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

A company borrows $20,000 with 8% interest on October 1, 2012. This amount plus interest is due on September 30, 2013. Record the adjusting entry on December 31, 2012.

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

The matching principle states that we recognize expenses in the same period as the revenues they help to generate.