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Exam 4: Adjustments,financial Statements,and Financial Results

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Question 31

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Purrfect Pets has made all the year-end adjustments.Its expense accounts total $130,000,and its revenue accounts total $190,000.The closing journal entry to close the income statement accounts for the year will:

A) debit its various expense accounts for a total of $130,000,debit retained earnings for $60,000,and credit its various revenue accounts for a total of $190,000.
B) debit its various revenue accounts for a total of $190,000,credit retained earnings for $60,000,and credit its various expense accounts for a total of $130,000.
C) debit its various expense accounts for a total of $130,000,credit its various revenue accounts for a total of $190,000,and credit retained earnings for $60,000.
D) debit its various revenue accounts for a total of $190,000,debit retained earnings for $60,000,and credit its various expense accounts for a total of $130,000.

E) None of the above
F) A) and D)

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Question 32

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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 $\int$ or › 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. b.The company provides services in June for which it had received payment of $18,300 in May. c.The company had $12,500 worth of labour performed by workers who will be paid in July. 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. 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}{lrr} \text { Insurance expense: Action ( \mathrm{D} or C) } &\underline{\quad\quad}& \text { Account Type \( (A, L, R, o r E) \)} &\underline{\quad\quad} \\ \text { Prepaid insurance: Action (D or C) } &\underline{\quad\quad}& \text { Account Tvpe (A. L. R. or E) }&\underline{\quad\quad} \\ \text { Effect on Retained earnings: } &\underline{\quad\quad}\\\end{array} \begin{array}{lrr} \text { Insurance expense: Action ( \mathrm{D} or C) } &\underline{\quad\quad}& \text { Account Type \( (A, L, R, o r E) \)} &\underline{\quad\quad} \\ \text { Prepaid insurance: Action (D or C) } &\underline{\quad\quad}& \text { Account Tvpe (A. L. R. or E) }&\underline{\quad\quad} \\ \text { Effect on Retained earnings: } &\underline{\quad\quad}\\\end{array} \begin{array}{lrr} \text { Insurance expense: Action ( \mathrm{D} or C) } &\underline{\quad\quad}& \text { Account Type \( (A, L, R, o r E) \)} &\underline{\quad\quad} \\ \text { Prepaid insurance: Action (D or C) } &\underline{\quad\quad}& \text { Account Tvpe (A. L. R. or E) }&\underline{\quad\quad} \\ \text { Effect on Retained earnings: } &\underline{\quad\quad}\\\end{array} \begin{array}{lrr} \text { Insurance expense: Action ( \mathrm{D} or C) } &\underline{\quad\quad}& \text { Account Type \( (A, L, R, o r E) \)} &\underline{\quad\quad} \\ \text { Prepaid insurance: Action (D or C) } &\underline{\quad\quad}& \text { Account Tvpe (A. L. R. or E) }&\underline{\quad\quad} \\ \text { Effect on Retained earnings: } &\underline{\quad\quad}\\\end{array} \begin{array}{lrr} \text { Insurance expense: Action ( \mathrm{D} or C) } &\underline{\quad\quad}& \text { Account Type \( (A, L, R, o r E) \)} &\underline{\quad\quad} \\ \text { Prepaid insurance: Action (D or C) } &\underline{\quad\quad}& \text { Account Tvpe (A. L. R. or E) }&\underline{\quad\quad} \\ \text { Effect on Retained earnings: } &\underline{\quad\quad}\\\end{array}

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Question 33

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

.Required: A.Analyze the changes in this schedule for each transaction; then explain the transaction. Transaction (1)is given below as an example: (1)Accounts Receivable decreased $200,and Cash increased by $200.Therefore, transaction (a)was the collection of $200 cash from a customer on account. B.Using the September 30 balances shown in column (6),prepare an income statement,statement of retained earnings,and balance sheet.

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

Amortization expense represents the use of part of the value of an asset until it has no remaining market value. BT: Comprehension

The company's unadjusted trial balance includes the following account balances: The following data are available to determine adjusting entries: A)$4,350 of prepaid insurance expired during the period. B)The company estimates amortization expense of $8,150 for the period. C)A count showed $85,700 of supplies on hand. D)Interest earned and receivable on the outstanding notes receivable is $260 for the period. Prepare the adjusting journal entries that should be recorded.Then,prepare an adjusted trial balance. $\begin{array}{c}\text { UNADJUSTED TRLAL BALANCE }\\\\\begin{array}{lrr}\text { Account}&\text { Debit}&\text { Credit}\\\text { Cash } & \$ 68,900 \\\text { Accounts receivable } & 116,300 \\\text { Interest receivable } & 1,300 \\\text { Supplies } & 138,600 \\\text { Prepaid insurance } & 8,700 \\\text { Notes receivable } & 50,000 \\\text { Property and equipment } & 277,800\\\text { Accumulated amortization } && \$ 64,500 \\\text { Accounts payable } && 104,100 \\\text { Accrued liabilities } & &21,600 \\\text { Unearned revenue } & &9,200 \\\text { Notes payable } && 87,400 \\\text { Contributed capital }& & 216,100 \\\text { Retained earnings } && 143,500 \\\text { Sales revenue } && 40,500 \\\text { Interest revenue } && 21,900\\\text { Cost of service expense } & 26,400 \\\text { Supplies expense } & 0 \\\text { Amortization expense } & 0 \\\text { Wage expense } & 3,000 \\\text { Rent expense } & 17,800 \\\text { Insurance expense } & 0 \\& \\\text { Totals } & \$ 708,800& \$ 708,800\end{array}\end{array}$

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

Corporate income taxes have to be calculated before all other adjustments are made. BT: Knowledge

On the statement of retained earnings:

Which of the following statements is true?

At the beginning of the year,net income should be equal to:

If an expense has been incurred but will be paid later,then:

Revenue and expense accounts are permanent accounts because they always appear on the income statement. BT: Knowledge

After net income has been determined,it is then transferred to:

Income statement accounts are closed at what stage of the accounting process?

If a company has a net loss during the current accounting period,then the post-closing retained earnings will be smaller than the pre-closing retained earnings. BT: Comprehension

If certain assets are partially used up during the accounting period,then:

The new CEO of the company takes over on December 10,2011.He is promised a significant bonus for every percent he can raise net income in 2012 over 2011 results.Which of the following adjustments would aid him in making 2012 results look the most impressive?

Which of the following statements is true?