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Exam 3: Adjusting Accounts for Financial Statements

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Question 1

True/False

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The amount of the month-end adjusting entry for Insurance Expense is $1,000. If the entry is not made then expenses are understated by $1,000 and profit is overstated by $1,000.

A) True
B) False

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Question 2

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How much did Grow pay for insurance during 2023?

A) $4,500
B) $17,700
C) $18,000
D) $18,300
E) $8,700

F) A) and C)
G) A) and E)

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Question 3

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The adjusted trial balance contains information pertaining to

On April 1, Gallery Corp. entered into a two-month contract for $50,000. Gallery Corp. earned $25,000 of the contract in April and billed the customer. Gallery Corp. should recognize the revenue when it receives the customer's cheque.

Depreciation expense is an example of accrued expense.

A company's fiscal year must correspond with the calendar year.

A contra-asset account has a normal debit balance.

On May 1, 2020. Bee Advertising Company received $2,500 from Julie Cee for advertising services to be completed by April 30, 2021. Assume the receipt was recorded as unearned revenue and that at December 31, 2020, $1,000 of the fees had been earned. The adjusting entry prepared by Bee on December 31, 2020, should include

Explain the difference between cash basis accounting and accrual basis accounting.

Due to an oversight, the company bookkeeper made no adjusting entry for accrued and unpaid employee wages of $24,000 on December 31. This oversight would

On December 1, your company paid its insurance agent $2,400 for the annual insurance premium covering the twelve-month period beginning on December 1. The $2,400 payment was recorded on December 1 with a debit to the income statement account Insurance Expense and a credit to the current asset Cash. Your company prepares monthly financial statements at the end of each calendar month. The entry to be made at the December 31 month end to adjust the accounts is

A broad principle that requires identifying the activities of a business with specific time periods such as months, quarters, or years is the

Cesar Cielo's consulting business receives an advance payment of 70% of services to be performed. In August, Cesar agreed to perform $20,000 worth of services to be performed in September. Record the entry for the receipt of cash during the month of August.

Gallery Corp. owes its employees $7,000 for the week ended March 31. The company will pay the employees on April 5. The adjusting journal entry prepared on March 31 will include a debit to Salaries Expense and a credit to Cash.

The unadjusted trial balance for a company has total debit and credit column totals of $148,000. The Adjustments columns contain entries for the following: Office supplies used during the period, $2,650. Expiration of prepaid rent, $1,700. Accrued salaries expense, $3,500. Depreciation expense, $1,625. Accrued service revenues, $2,500. The Adjusted Trial Balance columns total to

Which of the following does not require an adjusting entry at year-end?

The revenue recognition principle is the basis for making adjusting entries that pertain to unearned and accrued revenues.

Interim financial reports cover a firm's business activity for one year.

Internal transactions have no effect on the accounting equation.

A balance sheet that places the liabilities and equity to the right of the assets is called a(n)