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Exam 3: The Financial Reporting Process

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Question 21

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Which of the following is true about adjusting entries?

A) Entries are necessary due to the conservatism principle.
B) Entries can be done at the beginning or end of the accounting period.
C) They zero the balance of all income statement accounts.
D) They are a necessary part of accrual-basis accounting.

E) B) and D)
F) None of the above

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Question 22

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The adjusting entry for an unearned revenue has the effects of reducing liabilities and increasing net income.

A) True
B) False

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Question 23

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

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

What is an accrued expense?

Which of the following describes the purpose(s) of closing entries?

When a company makes an end-of-period adjusting entry which includes a credit to Prepaid Rent,the debit is usually made to:

Accrued expenses involve the payment of cash before recording an expense and a liability.

A classified balance sheet separates assets into current and long-term,and separates liabilities into current and long-term.

For the first three years of operations,the company reports net income of $1,000,$2,000,and $3,000,and pays dividends of $500,$1,000,and $1,000.What is the balance of retained earnings at the end of the third year?

On December 31,2012,employees who earn $500 per day have worked eight days and will be paid on January 6,2013.The adjusting entry on December 31,2012,includes a debit to Salaries Expense for $4,000.

Eve's Apples opened for business on January 1,2012,and paid for two insurance policies effective that date.The liability policy was $36,000 for eighteen-months,and the crop damage policy was $12,000 for a two-year term.What was the balance in Eve's Prepaid Insurance account as of December 31,2012?

The purpose of closing entries is to transfer:

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

In the first three years of operations,Lindsey Corporation earned net income/loss of -$150,000,$100,000,and $250,000.At the end of the third year,Lindsey Corporation has a balance of $120,000 for its Retained Earnings account.What is the total amount of dividends Lindsey Corporation paid over the three years?

The ending Retained Earnings balance of Juan's Mexican Restaurant chain increased by $3.2 million from the beginning of the year.The company declared a dividend of $1.3 million during the year.What was the net income earned during the year?

Which of the following is a possible closing entry?

Closing entries transfer the balances of all temporary accounts (revenues,expenses,and dividends)to the balance of the Common Stock account.

If the beginning balance of Retained Earnings equals $10,000,net income for the year equals $6,000,and dividends for the year equal $2,000,then the ending balance of Retained Earnings equals $18,000.

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