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Exam 4: Adjustments, financial Statements, and Financial Results

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Question 1

Multiple Choice

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Which of the following accounts does not normally have a credit balance on an adjusted trial balance?

A) Accumulated depreciation.
B) Dividends declared.
C) Accounts payable.
D) Contributed capital.

E) A) and B)
F) A) and C)

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Question 2

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You mistakenly include a contra account of $20,000 in the same column of your trial balance as the account it offsets.All other things equal,your debit and credit column totals will differ by $40,000.

A) True
B) False

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Question 3

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A company owes rent at a rate of $6,000 per month.The company pays the rent owed on the tenth of each month for the previous month.At the end of each month,what kind of adjustment is required?

The amounts of all the accounts reported on the balance sheet can be taken from the adjusted trial balance.

In general,adjusting journal entries improve the usefulness of the financial reports.

When closing out accounts,the amount debited to retained earnings should equal net loss on the income statement.

Accrual adjustments impact an asset and revenue account,or a liability and expense account.

Your business declared a $200 dividend on August 31,payable in September.On August 31,which of the following adjusting journal entries would be made?

A contra account is added to the account it offsets.

At the end of the month,the adjusting journal entry to record the use of supplies would include:

For each of the following transactions,match the action (Debit or Credit)and the account type (Asset,Liability,Revenue,or Expense)to each account for the appropriate adjustment that needs to be made at the end of June.Also,show the effect on Retained Earnings. (D)Debit or (C)Credit (A)Asset,(L)Liability,(R)Revenue or (E)Expense Account Increase or Decrease Retained Earnings a.The company has insurance costs of $620 a day for the month of June.On June 1 the company had $26,000 of prepaid insurance. $\begin{array} { | r | r | r | r | } \hline \text { Irsurarice expense: Action (D or C) } & - & \text { Accourt Tye } ( A , L , R , \text { or E) } & \\\hline \text { Prepaid irsurarice: Action (D or } \mathrm { C } ) & - & \text { Accourt Tye } \left( \mathrm { A } , \mathrm { L } _ { 2 } \mathrm { R } , \right. \text { or E) } & \\\hline \text { Effect on Retained earings: } & - & & \\\hline\end{array}$ b.The company provides services in June for which it had received payment of $18,300 in May. $\begin{array} { | r | r | r | r | } \hline \text { Irsurarice expense: Action (D or C) } & - & \text { Accourt Tye } ( A , L , R , \text { or E) } & \\\hline \text { Prepaid irsurarice: Action (D or } \mathrm { C } ) & - & \text { Accourt Tye } \left( \mathrm { A } , \mathrm { L } _ { 2 } \mathrm { R } , \right. \text { or E) } & \\\hline \text { Effect on Retained earings: } & - & & \\\hline\end{array}$ c.The company had $12,500 worth of labour performed by workers who will be paid in July. $\begin{array} { | r | r | r | r | } \hline \text { Wages experse: Action (D or C) } & - & \text { Accourt Type } ( A , I , R , \text { or } E ) & - \\\hline \text { Wages payable: Action (D or C) } & - & \text { Accourt Type } ( A , L , R , \text { or } E ) & - \\\hline \text { Effect on Retaired earings: } & - & & \\\hline\end{array}$ d.The company had income before income taxes of $287,400 for June and will pay taxes at the rate of 36%.The tax will be paid in July. $\begin{array} { | r | r | r | r | } \hline \text { Income tax experse: Action (D or C) } & - \text { Account Type } ( A , L , R , \text { or E } ) & - \\\hline \text { Irucorne tax payable: Action (D } \mathrm { C } ) & - & \text { Account Type } ( A , L , R , \text { or E) } & \\\hline \text { Effect on Retained earings: } & - & & - \\\hline\end{array}$ e.The company had interest of $1,000 due for June on a Certificate of Deposit (CD).The interest will be received in August. $\begin{array} { | r | r | r | r | } \hline \text { Irterest receivable: Action (D or C) } & - & \text { Accourt Type } ( A , I , R , \text { or E) } & \\\hline \text { Irterestreverue: Action (D or C) } & - & \text { Accourt Type } ( A , L , R , \text { or E) } & \\\hline \text { Effect on Retained earrings: } & - & & \\\hline\end{array}$

After adjusting journal entries are prepared and posted,but before closing journal entries are prepared and posted,the balance in retained earnings is equal to

Two types of closing journal entries are posted to retained earnings at year-end.These are entries to:

Which of the following is a true statement about the nature of Equipment,account?

Which of the following would appear in the credit column of an adjusted trial balance?

Of the $1,600 in supplies that were on hand at the beginning of the month,$400 remains at the end.What is the adjusting journal entry required at the end of the month?

An adjusted trial balance presents account balances in the same level of detail as the financial statements.

Permanent accounts:

As a company uses supplies,an adjustment should be made to decrease an asset account and increase an expense account as it represents the use of a resource (asset).

Which of the following accounts would normally be classified as a current liability?