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

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Question 71

True/False

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The adjusting entry to record accrued revenues results in an increase in assets and stockholders' equity.

A) True
B) False

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Question 72

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A trial balance prepared after the closing entries have been posted would show a zero balance in which one of the following accounts?

A) Inventory
B) Accounts receivable
C) Accumulated depreciation
D) Income tax expense

E) A) and D)
F) C) and D)

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Question 73

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Determine the effect of the following errors on the financial statements.Code your answers as follows: A.If the error results in an overstatement of the financial statement component. B.If the error results in an understatement of the financial statement component. C.If the error does not affect the financial statement component.

Which of the following journal entries was created as the result of a deferral?

Which of the following doesn't correctly describe a journal entry which debits interest expense and credits interest payable?

The declaration and payment of a $5,000 dividend by JLH Company would be reported on which of JLH's financial statements?

On July 1,2011,Bass Company paid a two-year insurance premium.On that date the following journal entry was made: $\begin{array} { l l l } \text { Prepaid insurance } & 4,800 & \\\quad \text { Cash } & & 4,800\end{array}$ The annual accounting period ends on December 31,2011. A.How much of the premium should be reported as expense on the 2011 income statement? B.What is the amount of prepaid insurance which should be reported on the balance sheet at December 31,2011? C.Prepare the adjusting entry that should be made on December 31,2011,assuming no adjusting entries have been made during the year.

On December 1,2011,Fleet Company paid $30,000 for three months rent and debited prepaid rent for $30,000; the rent payment was for three was for three months beginning December 1,2011.Prepare Fleet's adjusting entry required on December 31,2011.

On September 1,2011,Fast Track,Inc.was started with $30,000 invested by the owners as contributed capital.On September 30,2011,the accounting records contained the following amounts: $\begin{array}{lrlr}\text { Accounts payable } & \$ 2,200 & \text { Dividends declared and } & \$ 2,300 \\ & & \text { paid } & \\\text { Accounts receivable }&2,200 & \text { Office equipment } & 25,000 \\\text { Accumulated depreciation } & 500 & \text { Office supplies inventory } & 1,750 \\\text { Cash } & 10,000 & \text { Office supplies expense } & 600 \\\text { Consulting fees revenue } & 19,200 & \text { Rent expense } & 2,400 \\\text { Contributed capital } & 30,000 & \text { Salary expense } & 6,900 \\\text { Depreciation expense } & 500 & \text { Telephone expense } & 250\end{array}$ Prepare a statement of stockholders' equity for September,the first month of operation.Ignore income taxes.

The adjusting entry to record an accrued expense results in a decrease in both assets and stockholders' equity.

Determine the effect of the following errors on the financial statements.Code your answers as follows: A: If the error results in an overstatement of the financial statement component. B: If the error results in an understatement of the financial statement component. C.If the error does not affect the financial statement component.

The CHS Company paid $30,000 cash to its landlord on November 1,2011 for rent covering the six-month period from November 1,2011 through April 30,2012.Which of the following doesn't correctly describe the effect of the December 31,2011 adjusting entry on CHS Company's financial statements? (Assume that no adjusting entries have been made during the year.)

Which of the following journal entries was created as the result of a deferral?

Which of the following doesn't correctly describe a journal entry which debits depreciation expense and credits accumulated depreciation?

Which of the following correctly describes the effects of recording prepaid insurance when cash is paid to purchase an insurance policy?