Question 1

The ending balance in Retained Earnings is found on:

Accepted Answer

The ending balance in Retained Earnings is reported on both the statement of retained earnings and the balance sheet. The statement of retained earnings shows changes in retained earnings during the period, whereas the balance sheet reports the ending balance of retained earnings as part of the shareholders' equity section.

Question 2

The unadjusted trial balance for Water & Malt Inc.appears below as of December 31,2017.
  Additional data is as follows:
  Based on the unadjusted trial balance and the additional data,prepare a balance sheet for Water & Malt Inc.dated December 31,2017.

Accepted Answer

The answer of The unadjusted trial balance for Water &...

Question 3

In what order are financial statements generally prepared?

Accepted Answer

The answer of In what order are financial statements generally...

Question 4

Ed Ng is a friend of yours from university.After finishing high school he decided to open his own human resources consulting business rather than working for a large bureaucratic organization.He recently opened his business,and has contracted his services to a number of local retailers.He is paid a monthly fee for his services.
He has just received his first set of financial statements from his accountant.He is quite upset.The statements show a cash balance of $7,200 at the end of the month,but a net income of only $1,000.He has written you a letter,asking you whether such a situation is possible,or whether he should find another accountant.
Please explain to Ed what happened.

Accepted Answer

The answer of Ed Ng is a friend of yours...

Question 5

Prepaid expense accounts should appear on the balance sheet.

Accepted Answer

Prepaid expenses are considered assets and therefore should appear on the balance sheet as a current asset.

Question 6

The December 31,2013,trial balance of Sable Inc.included the following accounts:
  Additional data:
  Prepare the necessary year-end adjusting entries as of December 31,2013.

Accepted Answer

The answer of The December 31,2013,trial balance of Sable Inc.included...

Question 7

Briefly explain the difference between the cash basis of accounting and the accrual basis of accounting.Are adjusting entries necessary under both methods?

Accepted Answer

The answer of Briefly explain the difference between the cash...

Question 8

The statement of retained earnings is the first financial statement to be prepared,followed by the balance sheet,and then the income statement.

Accepted Answer

The correct order of financial statement preparation is as follows: 1) Income statement, 2) Statement of retained earnings, 3) Balance sheet.

Question 9

Barley & Hops Company was formed in 2014.During the year the company had the following events occur:
1.The company issued $100,000 in common shares for cash.
2.The company purchased equipment for $15,000,paying $5,000 down and signing a 1-year,8% note for the balance.
3.The company hired 4 employees.
4.The company had sales of $250,000.All sales were on account.
5.The company incurred the following expenses: rent: $2,000,salaries: $20,000,advertising $2,000 and utilities $4,000.All expenses were paid in cash.

Accepted Answer

The answer of Barley & Hops Company was formed in...

Question 10

Why does an accountant prepare the income statement first?

Accepted Answer

The net income must be computed first to properly complete the other financial statements, such as the balance sheet and statement of cash flows, as they rely on information from the income statement.

Question 11

Assume the beginning balance in the Retained Earnings account is zero.If a debit balance exists in Retained Earnings after closing out revenues and expenses at the end of the current period,it indicates:

Accepted Answer

A debit balance in Retained Earnings indicates that expenses exceeded revenues, resulting in a net loss for the period.

Question 12

Net income appears on:

Accepted Answer

Net income is calculated on the income statement and then flows to the statement of retained earnings, which ultimately impacts the balance sheet. Therefore, net income appears on both the income statement and the statement of retained earnings.

Question 13

Retained earnings for the beginning of a period appears on the statement of retained earnings while the ending balance of retained earnings appears on the statement of retained earnings and the balance sheet.

Accepted Answer

This is because the statement of retained earnings is prepared for a period and shows the beginning balance, adjustments (such as net income or dividends), and the resulting ending balance. The ending balance is then carried over to the balance sheet as the retained earnings balance for that same period.

Question 14

On a cash flow statement,closing entries will:

Accepted Answer

Closing entries are not transactions that affect cash inflows or outflows, so they do not appear on the cash flow statement. The cash flow statement only shows changes in cash from operating, investing, and financing activities.

Question 15

Blitz Limited has recently hired a junior accountant.The accountant noticed that his predecessor had made several mistakes in recording transactions during the most recent fiscal year.For each of the following situations,prepare the adjusting entry that should be made to correct the error.
1.Blitz received a $15,000 advance from a client for work that is going to be completed in the next year.The bookkeeper debited cash and credited revenue.
2.Blitz purchased a new piece of equipment at a cost of $36,000.At the time of purchase,the equipment was debited to repairs and maintenance expense.The equipment is expected to have a useful life of 10 years.Blitz uses straight-line depreciation.Assume that the equipment had been in use for a full year.
3.During the year Blitz declared $5,000 in dividends.The bookkeeper had recorded this payment as a debit to dividends expense and a credit to cash.

Accepted Answer

The answer of Blitz Limited has recently hired a junior...

Question 16

Pale Ale Ltd.had the following trial balance as of June 30,2014:
  Additional information:
  Based on the trial balance and the additional data,prepare an adjusted trial balance dated June 30,2014.

Accepted Answer

The answer of Pale Ale Ltd.had the following trial balance...

Question 17

Prepare adjusting entries dated December 31,2013,based on the following data.
a.A two-year insurance policy costing $6,000 was purchased on October 31,2013.
b.Salaries owed to employees on December 31,2013,amount to $4,600.
c.The balance in Supplies before adjustment is $2,800.A physical count reveals $900 of supplies on hand on December 31,2013.
d.Depreciation on office equipment for the year is $1,869.

Accepted Answer

The answer of Prepare adjusting entries dated December 31,2013,based on...

Question 18

The unadjusted trial balance for Peanut Butter & Jam Inc.appears below as of December 31,2017.
  Additional data is as follows:
  Based on the unadjusted trial balance and the additional data,prepare a balance sheet for Peanut Butter & Jam Inc.dated December 31,2017.

Accepted Answer

The answer of The unadjusted trial balance for Peanut Butter...

Question 19

Given the adjusted trial balance for Destiny Inc.below as of December 31,2017 prepare the income statement and statement of retained earnings for the year ended December 31,2017.

Accepted Answer

The answer of Given the adjusted trial balance for Destiny...

Question 20

The adjusted trial balance for Fine Porter Inc.as of December 31,2017,is shown below.Prepare the income statement and statement of retained earnings for the year ended December 31,2017.

Accepted Answer

The answer of The adjusted trial balance for Fine Porter...

Quiz 3: Accrual Accounting and the Financial Statements