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Exam 3: Adjusting the Accounts

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Question 71

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Adjusting entries are not necessary if the trial balance debit and credit column balances are equal.

A) True
B) False

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Question 72

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The adjusted trial balance of Hanson Hawk Company at September 30, 2018 includes the following accounts: Retained Earnings $27,700; Dividends $9,750; Service Revenue $46,800; Insurance Expense $1,950; Salaries Expense $18,000; Rent Expense $3,000; Supplies Expense $650; and Depreciation Expense $1,100. Prepare a retained earnings statement for the year.

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Question 73

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Book value is also referred to as

In general, the shorter the time period, the difficulty of making the proper adjustments to accounts

The revenue recognition principle dictates that revenue be recognized in the accounting period

The White Stripes Animal Encounters operates a drive through tourist attraction. The company adjusts its accounts at the end of each month. The selected accounts appearing below reflect balances after adjusting entries were prepared on April 30. The adjusted trial balance shows the following: $\begin{array}{lr}\text { Prepaid Rent } & \$ 16,000 \\\text { Buildings } & 30,000 \\\text { Accumulated Depreciation-Buildings } & 6,600 \\\text { Uneamed Ticket Revenue } & 600\end{array}$ Other data: 1. Three months' rent had been prepaid on April 1. 2. The buildings are being depreciated at $7,200 per year. 3. The unearned ticket revenue represents tickets sold for future visits. The tickets were sold at $5.00 each on April 1. During April, thirty of the tickets were used by customers. Instructions (a) Calculate the following: 1. Monthly rent expense. 2. The age of the buildings in months. 3. The number of tickets sold on April 1. (b) Prepare the adjusting entries that were made by the White Stripes Animal Encounters on April 30.

The income statement is an important financial statement used by individuals who are interested in the operations of a business enterprise. Explain how the time period assumption and the revenue recognition and expense recognition principles provide guidance to accountants in preparing an income statement.

Adjusting entries are often made because some business events are not recorded as they occur.

Indicate (a) the type of adjustment (prepaid expense, unearned revenue, accrued revenue, or accrued expense), and (b) the accounts before adjustment (overstated or understated) for each of the following: 1. Supplies of $200 have been used. 2. Salaries of $600 are unpaid. 3. Rent received in advance totaling $300 has been earned. 4. Services provided but not recorded total $500.

The adjusted trial balance of the Victoria Lane Paving Company includes the following balance sheet accounts that frequently require adjustment. For each account, indicate (a) the type of adjusting entry (prepaid expenses, unearned revenues, accrued revenues, or accrued expenses) and (b) the related account in the adjusting entry.

The time period assumption states that the economic life of a business entity can be divided into artificial time periods.

Before month-end adjustments are made, the February 28 trial balance of Neutral Milk Hotel contains revenue of $7,000 and expenses of $4,400. Adjustments are necessary for the following items: .Depreciation for February is $1,800. .Revenue recognized but not yet billed is $2,700. .Accrued interest expense is $700. .Revenue collected in advance that is now recognized is $2,500. .Portion of prepaid insurance expired during February is $400. Instructions Calculate the correct net income for Neutral Milk Hotel's Income Statement for February.

An adjusting entry always involves two balance sheet accounts.

175. Valuing assets at their fair value rather than at their cost is inconsistent with the:

NWA Air Charter signed a four-month note payable in the amount of $20,000 on September 1. The note requires interest at an annual rate of 9%. The amount of interest to be accrued at the end of September is

SurferRosa Music Store borrowed $30,000 from the bank signing a 9%, 3-month note on September 1. Principal and interest are payable to the bank on December 1. If the company prepares monthly financial statements, the adjusting entry that the company should make for interest on September 30, would be

For each of the following accounts, indicate (a) the type of adjusting entry (prepaid expense, accrued revenue, etc.) and (b) the related account in the adjusting entry. 1. Depreciation Expense 2. Salaries and Wages Payable 3. Service Revenue 4. Supplies 5. Unearned Service Revenue

Determine the impact on the balance sheet accounts if the following information is not used to adjust the accounts of Mood Food Company for the month of January, 2018. Round answers to the nearest dollar. 1. The company rents extra office space to Beulah, CPAs. Beulah pays the $6,000 rent annually on January 1. 2. The company has an outstanding loan to its President in the amount of $150,000. The loan accrues interest at the annual rate of 6%. Principal and interest are due January 1, 2020. 3. The company completed work on a project during January that was not yet billed to the client. The client will be charged $3,100.

The balance sheets of Red House Painters include the following: Instructions Calculate the following for 2018: 1. Cash received for interest. 2. Cash paid for supplies. 3. Cash paid for salaries and wages. 4. Cash received for revenue.

A company spends $15 million dollars for an office building. Over what period should the cost be written off?