Question 1

The unadjusted trial balance of Sketch Star Makers Inc. ,prepared as of December 31,2018,includes the following account balances.All of the accounts listed have normal balances.
 $\begin{array}{lr}
\text { Cash } & \$ 5,000 \
\text { Accounts Receivable } & 3,000 \
\text { Supplies } & 1,500 \
\text { Prepaid Insurance } & 7,200 \
\text { Equipment } & 15,000 \
\text { Accumulated Depreciation } & 3,000 \
\text { Notes Payable (long-term) } & 30,000 \
\text { Deferred Revenue } & 7,500 \
\text { Service Revenue } & 45,000 \
\text { Salaries and Wages Expense } & 45,000
\end{array}$ The following information is also available: 
A)A count of supplies revealed $600 worth on hand at December 31,2018.
B)An insurance policy,purchased on January 1,2018,covers four years.
C)The equipment depreciates at a rate of $1,500 per year;no depreciation has been recorded for 2018.
D)Three-fifths (or 60%)of the amount recorded as Deferred Revenue remains deferred as of December 31,2018.
E)The accrued amount of salaries and wages at December 31,2018 is $3,000.

Accepted Answer

The answer of The unadjusted trial balance of Sketch Star...

Question 2

When it paid its insurance in advance,a company recorded Prepaid Insurance.As of the end of the accounting year,the prepayment had expired.If no adjustment is made to record this expiration,which of the following will occur?

Accepted Answer

The related adjusting entry would include a debit to Insurance Expense and a credit to a Prepaid Insurance,an asset.If that entry is not prepared,assets will be overstated and expenses will both be understated.

Question 3

Match each transaction with the type of entry that will be required at April 30,the company's year-end.
-The company transfers revenues of $50,000 and expenses of $32,000 to Retained Earnings.

Accepted Answer

This transaction involves transferring revenues and expenses to Retained Earnings, which is done through a closing entry at the end of the accounting period.

Question 4

Match each transaction with the type of entry that will be required at April 30,the company's year-end.
-The company provides lawn care in April for customers who paid in March.

Accepted Answer

This transaction is a deferral adjusting entry because the company received payment in March (before the services were provided) and needs to recognize the revenue in April when the lawn care services are actually performed. This adjusts the previously recorded liability (unearned revenue) to revenue.

Question 5

Which of the following errors causes net income to be understated?

Accepted Answer

Revenue that has been earned but not recorded will overstate net income.The failure to record an expense,such as Salaries and Wages Expense or Depreciation Expense,will understate expenses and,as a result,overstate net income.The collection of an accounts receivable that is not recorded will understate Cash and overstate Accounts Receivable;as such,it would have no impact on net income.

Question 6

Which of the following will happen if the accrual adjusting entry is not made for revenue earned but not yet recorded?

Accepted Answer

The related accrual adjustment would include a debit to Accounts Receivable,an asset,and a credit to a revenue account.If that entry is not prepared,assets and revenues will both be understated.

Question 7

On December 31,2018,Ditka Inc.had Retained Earnings of $267,800 before its closing entries were prepared and posted.During 2018,the company had service revenue of $168,100 and interest revenue of $81,300.The company used supplies in the amount of $87,900,advertising expenses were $16,400,salaries and wages totaled $18,300,and income tax expense was calculated as $13,700.During the year,the company declared and paid dividends of $6,000.
Required:
Part a.Prepare the closing entries dated December 31,2018.
Part b.Prepare T-account for the Retained Earnings account.Enter the beginning balance into the T-account,post the closing entries,and then determine the ending balance.

Accepted Answer

The answer of On December 31,2018,Ditka Inc.had Retained Earnings of...

Question 8

Match each transaction with the type of entry that will be required at April 30,the company's year-end.
-The company uses $1,600 worth of fertilizer from its stock of supplies.

Accepted Answer

The use of $1,600 worth of fertilizer from stock is a deferral adjusting entry because it adjusts the amount of supplies on hand, recognizing the expense associated with the supplies used during the period.

Question 9

Bantam company calculated its net income to be $38,775 based on the unadjusted trial balance.The following adjusting entries were then made for:
Salaries and wages owed but not yet paid of $395.
Interest earned but not received from investments of $375.
Prepaid insurance premiums amounting to $275 have expired.
Deferred revenue in the amount of $375 has now been earned.
Required:
Determine the amount of net income (loss)that will be reported after the adjustments are recorded.

Accepted Answer

The answer of Bantam company calculated its net income to...

Question 10

All of the transactions of Harding Trading Co.for the year have been journalized and posted.The following information has been gathered for the adjustment process as of December 31,2018:
A.The Supplies account shows a balance of $900.A count of supplies revealed $400 on hand.
B.The $1,200 premium relating to a one-year insurance policy was paid on December 1,2018.
C.The company's equipment,which was purchased last year,depreciates at a rate of $1,000 per year.
D.On September 30,2018,a customer paid $10,000 in advance for services;as of December 31,2018,services in the amount of $3,000 had been performed for this customer.
E.Employees are paid $5,000 on Fridays for the 5-day workweek,which ends on that Friday.However,December 31,2018 falls on a Thursday.
F.The company has completed $500 of work for customers;the customers have not yet been billed and the related revenue has not been recorded.
Required:
Part a.Prepare the required adjusting entries required at December 31,2018.
Part b.For each of the adjusting items,indicate the amount and the direction of effects of the adjusting journal entry on the elements of the balance sheet and income statement.Complete the following table by entering the amount and the direction (+ for increase,− for decrease)or leave blank for no effect.

Accepted Answer

The answer of All of the transactions of Harding Trading...

Question 11

On April 30,2018,Hawes Co.purchased a three-year insurance policy with a cash payment of $25,200.Coverage began immediately.
Required:
Part a.What is the amount of Insurance Expense relating to this insurance policy that will be reported for the year ended December 31,2018?
Part b.What is the balance of the Prepaid Insurance account at December 31,2018?

Accepted Answer

The answer of On April 30,2018,Hawes Co.purchased a three-year insurance...

Question 12

Match each transaction with the type of entry that will be required at April 30,the company's year-end.
-The company provides lawn care in April for customers who will be billed and make payment in May.

Accepted Answer

This transaction requires an accrual adjusting entry because the company has provided services but has not yet received payment, thus recognizing revenue earned in April that will be collected in May.

Question 13

The failure to record an accrual adjustment relating to salaries and wages would not affect the:

Accepted Answer

The statement of cash flows is not affected since adjusting entries do not involve the Cash account.The accrual of wages affects Salaries and Wages Expense (reported on the income statement)and Salaries and Wages Payable (reported on the balance sheet).Since Salaries and Wages Expense is affected,net income is also affected,and,in turn,Retained Earnings (reported on the statement of retained earnings)is affected.

Question 14

Which of the following will happen if the accrual adjustment entry is not made to record an expense incurred but not yet recorded?

Accepted Answer

The related accrual adjustment would include a debit to an expense account and a credit to a liability account.If that entry is not prepared,liabilities and expenses will both be understated.

Question 15

The alphabetical listing below includes all of the adjusted account balances of Battle Creek,Inc.as of December 31,2018.All account balances are normal.
 $\begin{array}{lr}
\text { Accounts Payable } & \$, 000 \
\text { Accounts Receivable } & 16,000 \
\text { Accumulated Depreciation } & 6,000 \
\text { Common Stock } & 4,000 \
\text { Cash } & 10,000 \
\text { Depreciation Expense } & 2,000 \
\text { Dividends } & 2,000 \
\text { Equipment } & 18,000 \
\text { Income Tax Expense } & 2,000 \
\text { Income Taxes Payable } & 2,000 \
\text { Rent Expense } & 4,000 \
\text { Retained Earnings } & 6,000 \
\text { Salaries and Wages Expense } & 8,000 \
\text { Service Revenue } & 36,000 \
\text { Deferred Revenue } & 2,000
\end{array}$ Required:
Part a.Prepare the closing entries.
Part b.Prepare the post-closing trial balance as of December 31,2018.
Part c.Prepare the classified balance sheet at December 31,2018.

Accepted Answer

The answer of The alphabetical listing below includes all of...

Question 16

If the total amount that should have been debited to Rent Expense is mistakenly debited instead to Prepaid Rent,what will be the effect on the financial statements for the year?

Accepted Answer

If the debit is not posted to Rent Expense,expenses will be understated.Posting the debit instead to Prepaid Rent will cause that asset account to increase and,as a result,assets will be overstated.

Question 17

Match each transaction with the type of entry that will be required at April 30,the company's year-end.
-The company makes an entry to allocate the use of equipment during the current account period.

Accepted Answer

The answer of Match each transaction with the type of...

Question 18

Match each transaction with the type of entry that will be required at April 30,the company's year-end.
-The company owes interest on loans for the month of April and will not pay this interest until May.

Accepted Answer

An accrual adjusting entry is required because the interest expense has been incurred but has not yet been paid or recorded. This entry will ensure that the company's financial statements accurately reflect its expenses as of April 30.

Question 19

All of the accounts of the Grass is Greener Company have been adjusted as of December 31,2018,with the exception of income taxes incurred but not yet recorded.Those account balances appear below.All have normal balances.The estimated income tax rate for the company is 40%.
  Required:
a.Calculate the income before income tax.
b.Calculate the income tax expense.
c.Calculate the net income.

Accepted Answer

The answer of All of the accounts of the Grass...

Question 20

Match each transaction with the type of entry that will be required at April 30,the company's year-end.
-The company has $8,300 in Prepaid Rent at the beginning of April and uses $3,600 of that for its April rent.

Accepted Answer

This transaction requires a deferral adjusting entry because a portion of the prepaid rent ($3,600) was used in April, and therefore needs to be recognized as an expense for the month.

Quiz 4: Adjustments,Financial Statements,and Financial Results

When it paid its insurance in advance,a company recorded Prepaid Insurance.As of the end of the accounting year,the prepayment had expired.If no adjustment is made to record this expiration,which of the following will occur?

Match each transaction with the type of entry that will be required at April 30,the company's year-end. -The company transfers revenues of $50,000 and expenses of $32,000 to Retained Earnings.

Match each transaction with the type of entry that will be required at April 30,the company's year-end. -The company provides lawn care in April for customers who paid in March.

Which of the following errors causes net income to be understated?

Which of the following will happen if the accrual adjusting entry is not made for revenue earned but not yet recorded?

Match each transaction with the type of entry that will be required at April 30,the company's year-end. -The company uses $1,600 worth of fertilizer from its stock of supplies.

Match each transaction with the type of entry that will be required at April 30,the company's year-end. -The company provides lawn care in April for customers who will be billed and make payment in May.

The failure to record an accrual adjustment relating to salaries and wages would not affect the:

Which of the following will happen if the accrual adjustment entry is not made to record an expense incurred but not yet recorded?

If the total amount that should have been debited to Rent Expense is mistakenly debited instead to Prepaid Rent,what will be the effect on the financial statements for the year?

Match each transaction with the type of entry that will be required at April 30,the company's year-end. -The company makes an entry to allocate the use of equipment during the current account period.

Match each transaction with the type of entry that will be required at April 30,the company's year-end. -The company owes interest on loans for the month of April and will not pay this interest until May.

Match each transaction with the type of entry that will be required at April 30,the company's year-end. -The company has $8,300 in Prepaid Rent at the beginning of April and uses $3,600 of that for its April rent.