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Exam 4: Adjustments,financial Statements,and the Quality of Earnings

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Question 51

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Expresso Company purchased a machine that cost $28,000 and had an estimated useful life of 7 years (no residual value) on January 1,20A.The company uses the straight-line method of amortization.The net book value at the end of 20B,would be which of the following?

A) $16,000.
B) $20,000.
C) $24,000.
D) $28,000.

E) All of the above
F) None of the above

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Question 52

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Four transactions are given below that were completed during 20A by Wren Company.The annual accounting period ends December 31.Each transaction requires an adjusting entry at December 31,20A.You are to provide the adjusting entries required for Wren Company. A.On December 31,20A,Wren Company owed employees $1,750 for wages that were earned by them during December and were not recorded. December 31,20A--Adjusting entry: B.During 20A,Wren Company purchased office supplies that cost $500 which were placed in the supplies room for use as needed.The purchase was recorded as follows: 20A: At the beginning of 20A,the inventory of unused office supplies was $75.At the end of 20A,a count showed unused office supplies in the supply room amounting to $100. December 31,20A--Adjusting entry: C.On December 1,20A,Wren Company rented some office space to another party.Wren collected $900 rent for the period December 1,20A,to March 1,20B.The rent collected was recorded as follows: December 1,20A: December 31,20A--Adjusting entry: D.On June 1,20A,Wren Company borrowed $2,000 cash on a one-year,10% interest-bearing,note payable.The interest is payable on the due date,May 31,20B.The note was recorded as follows:

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Question 53

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Both the adjusting entries and the closing entries usually are dated as of the last day of the accounting period.

For each of the following transactions,indicate the amounts and direction of effects of the adjusting entry on the elements of the statement of financial position and income statement.Using the following format,indicate + for increase,and - for decrease,and NE for no effect. Transactions: a.We have accrued wages owed but not paid to our employees at the end of the year,$4,500. b.We used supplies in the amount of $6,000 during the year that are currently recorded in the office supplies account. c.The one year bank loan we took out on October 1,20A,in the amount of $100,000 has accrued interest that will not be paid until September 30,20B,along with the principal.

On April 1,20A,Allen Company signed a $12,000,one-year,10 percent note payable.At due date,April 1,20B,the principal and interest will be paid.Interest expense should be reported on the income statement (for the year ended December 31,20A) as which of the following?

An adjusted trial balance is usually developed to show the balances in all of the accounts after the effects of the adjusting and closing entries.

Allen Corporation is completing the accounting information processing cycle at the end of the fiscal year,June 30,20B.The following trial balances are on Allen's worksheet at June 30,20B. A.Reconstruct the adjusting entries and give a brief explanation of each. B.What is the amount of profit? C.What is the earnings per share (EPS)assuming 1,000 shares are outstanding?

Which of the following statements best describes the relationship between profit for the period and the ending balance in retained earnings?

At the end of the accounting period,the balances in the nominal accounts are closed while the balances in the real accounts are carried forward to the next period.

A.Explain how the income statement relates to the statement of changes in equity B.Explain how the statement of changes in equity relates to the statement of financial position. C.Explain how the statement of cash flows relates to the statement of financial position.

Usually,adjusting entries are entered in the accounts at the end of the accounting period.

On December 31,20X,Martin Company prepared an income statement and a statement of financial position.In making the adjusting entries at year-end,Martin failed to record the adjusting entry for wages earned by employees,but not yet paid,amounting to $3,000 for the last four days of the year.The income statement reported profit of $21,000.The statement of financial position reported total assets,$82,000; total liabilities,$30,000; and shareholders' equity,$52,000. Complete the following tabulation to show the correct amounts for the financial statements.

On January 1,20C,the balance in the prepaid insurance account was $1,200.On December 31,20C,after the 20C adjusting entries were made,the balance of the prepaid insurance account was $1,000.During 20C,cash payments for insurance premiums amounted to $4,000,which was debited to the prepaid insurance account.Give the adjusting entry which must have been made at the end of 20C.

Which of the following is one of the sections on the statement of cash flows?

Return on equity is a ratio that:

Is the adjusted trial balance a financial statement? Explain why or why not.

During the accounting period,an expense paid in advance and debited to prepaid expense was $180; therefore,the adjusting entry for the expiration of this item should be to debit an expense account for $180 and credit a prepaid expense account for $180.

Joe Company purchased supplies inventory for $5,000.Due to an error in posting,the inventory account was debited for only $500 when trade payables was credited for $5,000.During which phase of the accounting information cycle would this error be discovered?

If a business declared and paid a $500 dividend,it would appear on which of the following?

If a company fails to adjust a Prepaid Rent account for rent that has expired,what effect will this have on that month's financial statements?