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Exam 3: Adjusting Accounts and Preparing Financial Statements

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Question 1

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A company entered into a 2-month contract for $50,000 on April 1.It earned $25,000 of the contract services in April and billed the customer.The company should recognize the revenue when it receives the customer's check.

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Question 2

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The adjusting entry to record the salaries earned due to employees for services provided but unpaid at the end of the accounting period affects the accounts in which of the following ways?

A) Debit Salaries Payable and credit Salaries Expense.
B) Debit Salaries Expense and credit Cash.
C) Debit Accrued Salaries and credit Salaries Payable.
D) Debit Cash and credit Salaries Expense.
E) Debit Salaries Expense and credit Salaries Payable.

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Question 3

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On April 1,Santa Fe,Inc.paid Griffith Publishing Company $1,548 for 36-month subscriptions to several different magazines.Santa Fe debited the prepayment to a Prepaid Subscriptions account,and the subscriptions started immediately.What adjusting entry should be made by Santa Fe,Inc.for the adjustment on December 31 of the first year assuming the company is using a calendar reporting period and no previous adjustments had been made?

A company earned $3,000 in net income for October.Its net sales for October were $10,000.Its profit margin is:

An _______________________ is a listing of all of the accounts in the ledger with their account balances before adjustments are made.

The length of time covered by a set of periodic financial statements,primarily a year for most companies,is referred to as the:

Rogers Company's employees are paid a total of $1,600 per day for a 5-day workweek.The employees are paid each Friday.This year the accounting period ends on Tuesday.Prepare the December 31 year-end adjusting journal entry Rogers Company should make to accrue wages.

Depreciation expense for a period is the portion of a plant asset's cost that is allocated to that period.

On July 1,a company paid the $2,400 premium on a one-year insurance policy with benefits beginning on that date.What will be the insurance expense on the annual income statement for the current year ended December 31?

The balances in Sanchez Accounting Services' office supplies account on February 1 and February 28 were $1,200 and $375,respectively.If the office supplies expense for the month is $1,900,what amount of office supplies was purchased during February?

The main purpose of adjusting entries is to:

Asset and liability balances are transferred from the adjusted trial balance to the income statement.

The adjusting entry to record an accrued revenue is:

Prior to recording adjusting entries on December 31,a company's Office Supplies account had an $780 debit balance.A physical count of the supplies showed $425 of unused supplies available as of December 31.Prepare the required adjusting entry.

On April 1,Griffith Publishing Company received $1,548 from Santa Fe,Inc.for 36-month subscriptions to several different magazines.The company credited Unearned Fees for the amount received and the subscriptions started immediately.What is the adjusting entry that should be recorded by Griffith Publishing Company on December 31 of the second year?

The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called:

Profit margin = ___________________ divided by net sales.

A physical count of supplies on hand at the end of May for Masters,Inc.indicated $1,250 of supplies on hand.The general ledger balance before any adjustment is $2,100.What is the adjusting entry for office supplies that should be recorded on May 31?

On April 1,a company paid the $1,350 premium on a three-year insurance policy with benefits beginning on that date.What will be the insurance expense on the annual income statement for the year ended December 31?

Using the table below,indicate the impact of the following errors made during the adjusting entry process.Use a "+" for overstatements,a "-" for understatements,and a "0" for no effect.The first one is provided as an example.