340) What is an adjusted trial balance? Why is it prepared?
341) Why are financial statements prepared in a specific order?What is the usual order in which
financial statements are prepared from the adjusted trial balance?
342) Explain how a company uses the accrual basis of accounting.
343) Explain why temporary accounts are closed each period.
344) Explain the difference between temporary and permanent accounts.
345) List the steps in the accounting cycle.
346) How is a classified balance sheet different from an unclassified balance sheet? List the
usual order of the categories on a classified balance sheet.
347) How is the current ratio calculated? How is it used to evaluate a company?
348) Describe a work sheet and explain why it is useful.
349) List and explain the steps in preparing a 10-column worksheet.
350) What is the purpose of closing entries? Describe the closing process.
351) What is the purpose of a post-closing trial balance?
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352) Explain the purpose of reversing entries.
353) On December 31, the year end, a company forgot to record $6,000 of depreciation on
machinery. In the current year financial statements, what is the effect of this error on assets, net
income, and equity?
354) Given the table below, indicate the impact of the following errors made during the adjusting
entry process. Use a “+” followed by the amount for overstatements, a “-” followed by the
amount for understatements, and a “0” for no effect. The first one is done as an example.
Ex. Failed to recognize that $600 of unearned revenues, previously recorded as liabilities, had
been earned by year-end.
1. Failed to accrue interest expense of $200.
2. Forgot to record $7,700 of depreciation on machinery.
3. Failed to accrue $1,300 of revenue earned but not collected.
Error Revenues Expenses Assets Liabilities Equity
EX -$600 0 0 +$600 -$600
1. ________ ________ ________ ________ ________
2. ________ ________ ________ ________ ________
3. ________ ________ ________ ________ ________
355) A company issued financial statements for the year ended December 31, but failed to
include the following adjusting entries:
A. Accrued interest revenue earned of $1,200.
B. Depreciation expense of $4,000.
C. Portion of prepaid insurance expired (an asset) used $1,100.
D. Accrued taxes of $3,200.
E. Revenues of $5,200, originally recorded as unearned, have been earned by the end of the year.
Determine the correct amounts for the December 31 financial statements by completing the
following table:
Assets
Equity
Net Income
Reported amounts……
$350,000
$150,000
$70,000
Add (subtract) to
correct for item:
A…..
B…..
C…..
D…..
E…..
Corrected amounts………
$
$
$
Assets
Liabilities
Equity
Net Income
Reported amounts……
$350,000
$200,000
$150,000
$70,000
correct for item:
A………………………
1,200
1,200
1,200
B………………………
(4,000)
(4,000)
(4,000)
C………………………
(1,100)
(1,100)
(1,100)
D………………………
3,200
(3,200)
(3,200)
E………………………
(5,200)
5,200
5,200
Corrected amounts………
$346,100
$198,000
$148,100
$68,100
356) Using the table below, indicate the impact of the following errors made during the adjusting
entry process. Use a “+” for overstatements, a “-” for understatements, and a “0” for no effect.
The first one is provided as an example.
Error
Revenue
s
Expense
s
Assets
Liabilitie
s
Equit
y
Ex
.
Did not record depreciation for this period
0
–
+
0
+
1.
Did not record unpaid telephone bill
2.
Did not adjust unearned revenue account
for revenue earned this period.
3.
Did not adjust shop supplies for supplies
used this period
4.
Did not accrue employee salaries for this
period
5.
Recorded rent expense owed with a debit to
insurance expense and a credit to rent
payable
Error
Revenue
s
Expense
s
Asset
s
s
Equity
Ex
.
Did not record depreciation for this
0
–
+
0
+
1.
0
–
0
–
+
2.
Did not adjust unearned revenue
account for revenue earned this
period.
–
0
0
+
–
3.
Did not adjust shop supplies for
supplies used this period
0
–
+
0
+
4.
Did not accrue employee salaries for
this period
0
–
0
–
+
5.
Recorded rent expense owed with a
debit to insurance expense and a
credit to rent payable
0
0
0
0
0
357) Andrew’s net income was $280,000; its total assets were $1,050,000; and its net sales were
$3,500,000. Calculate the company’s profit margin ratio.
358) Farmers’ net income was $740,000 and its net sales were $8,000,000. Calculate its profit
margin ratio.
359) From the information provided, calculate Giuseppe’s profit margin ratio for each of the
three years. Comment on the results, assuming that the industry average for the profit margin
ratio is 6% for each of the three years.
2017 2016 2015
Net income $ 2,630 $ 2,100 $1,850
Net Sales 36,500 32,850 31,200
Total Assets 400,000 385,000 350,000
360) On December 14, Branch Company received $3,000 cash for 30 days of consulting services
that will be completed on January 13. Branch records all such prepayments by customers in a
liability account. Prepare the December 31 adjusting entry.
361) On December 31, Chu Company had performed $3,000 of management services for clients
that had not yet been billed. Prepare Chu’s adjusting entry to record these fees earned.
362) A company’s employees earn a total of $10,000 per week for a 5-day week that begins on
Monday. December 31 of Year 1 is a Monday, and all employees worked that day.
a) Prepare the required adjusting journal entry to record accrued salaries on December 31, Year
1.
b) Prepare the journal entry to record the payment of salaries on January 4, Year 2. (Assume no
reversing entries were made).
363) Glisten Co. leases an office to a tenant at the rate of $3,000 per month. The tenant contacted
Glisten and arranged to pay the rent for December on January 8 of the following year. Glisten
agrees to this arrangement.
a) Prepare the journal entry that Glisten must make at year ended December 31 to record the
accrued rent revenue.
b) Prepare the journal entry to record the receipt of the rent on January 8 of the following year
(Assume no reversing entries were made).
364) Prior to recording adjusting entries on December 31, a company’s Office Supplies account
had a $780 debit balance. A physical count of the supplies showed $425 of unused supplies
available as of December 31. Prepare the required adjusting entry.
365) Complete the following by filling in the blanks:
(1) The Prepaid Insurance account had a $545 debit balance at the beginning of the current year;
$650 of insurance premiums were paid during the year; and the year-end balance sheet showed
$420 of prepaid insurance; consequently, the income statement for the year must have shown
$________ of insurance expense.
(2) The Office Supplies account began the current year with a $235 debit balance; the income
statement for the year showed $475 of office supplies expense; and the year-end balance sheet
showed the current asset, office supplies, at $275; consequently, if all supplies were accounted
for, $________ of office supplies must have been purchased during the year.
366) Werner Company had $1,300 of store supplies at the beginning of the current year. During
this year, Werner purchased $6,250 worth of store supplies. On December 31, $1,125 worth of
store supplies remained. Calculate the amount of Werner Company’s store supplies expense for
the current year.
367) Prepare general journal entries on December 31 to record the following unrelated year-end
adjustments.
a. Estimated depreciation on equipment for the year, $4,500.
b. The Prepaid Insurance account has a $3,680 debit balance before adjustment. An examination
of insurance policies shows $600 of insurance expired.
c. The Prepaid Insurance account has a $2,400 debit balance before adjustment. An examination
of insurance policies shows $950 of unexpired insurance.
d. The company has three office employees who each earn $100 per day for a five-day
workweek that ends on Friday. The employees were paid on Friday, December 26, and have
worked full days on Monday, Tuesday, and Wednesday, December 29, 30, and 31.
e. On November 1, the company received 6 months’ rent in advance from a tenant whose rent is
$700 per month. The $4,200 was credited to the Unearned Rent account.
f. The company collects rent monthly from its tenants. One tenant whose rent is $1,000 per
month has not paid his rent for December.
368) Rogers Company’s employees are paid a total of $1,600 per day for a 5-day workweek. The
employees are paid each Friday. This year the accounting period ends on Tuesday. Prepare the
December 31 year-end adjusting journal entry Rogers Company should make to accrue salaries.
369) Show the December 31 adjusting entry to record $750 of earned but unpaid salaries of
employees at the end of the current accounting period.
370) Juno Company had $500 of office supplies available at the beginning of the current year.
During the year Juno Company purchased $2,750 worth of office supplies, which were debited to
the office supplies account. On December 31 of this year, $375 worth of office supplies
remained.
a. Calculate the amount of Juno Company’s office supplies expense for the current year. (Show
your calculations.)
b. Prepare the journal entry to adjust the supplies account.
371) During the current year ended December 31, clients paid fees in advance for accounting
services amounting to $15,000. These fees were recorded in an account called Unearned
Accounting Fees. If $3,500 of these fees remains unearned on December 31 of this year, prepare
the required December 31 adjusting entry to bring the accounts up to date.
157
372) The following unadjusted and adjusted trial balances are from the current year’s accounting
system for Excelsior.
Excelsior
Trial Balances
For Year Ended December 31
Unadjusted
Trial Balance
Adjusted
Trial Balance
Debit
Credit
Debit
Credit
Cash
11,300
11,300
Accounts receivable
16,340
17,140
Office supplies
1,145
645
Prepaid advertising
1,000
450
Building
26,700
26,700
Accumulated depreciation–Building …
1,300
6,300
Accounts payable ………………………
3,320
3,500
Unearned services revenue ……………
4,410
3,010
Common stock ……………………….
10,000
10,000
Retained earnings ……………………….
7,905
7,905
Services revenue…………………….
72,400
74,600
Salaries expense ……………………….
34,500
34,500
Utilities expense…………………..
5,450
5,630
Advertising expense ……………………..
2,900
3,450
Supplies expense ………………………..
500
Depreciation expense– building………….
5,000
Totals………………….
99,335
99,335
105,315
105,315
Present the six adjusting entries in general journal form that explain the changes in the account
balances from the unadjusted to the adjusted trial balance.
373) Trapper Company’s unadjusted and adjusted trial balances on December 31 of the current
year are as follows:
Unadjusted
Trial Balance
Adjusted
Trial Balance
Cash
4,000
4,000
Prepaid insurance
1,500
1,200
Equipment
9,000
9,000
Accumulated depreciation–
Equipment
800
1,800
Salaries payable
1,000
Unearned repair fees
2,500
600
Common stock ……………………….
1,000
1,000
Retained earnings
……………………….
4,400
4,400
Repair fees earned
10,000
11,900
Salaries expense
3,500
4,500
Depreciation expense–Equip.
1,000
Insurance expense
700
1,000
18,700
18,700
20,700
20,700
Present the four adjusting journal entries that were recorded by Trapper Company.
Dec. 31
Insurance Expense
300
300
31
Depreciation Expense–Equipment
31
Salaries Expense
31
Unearned Repair Fees
374) Record the December 31 adjusting entries for the following transactions and events in
general journal form. Assume that December 31 is the end of the annual accounting period.
a. The Prepaid Insurance account shows a debit balance of $2,340, representing the cost of a
two-year fire insurance policy that was purchased on October 1 of the current year and has not
been adjusted to-date.
b. The Store Supplies account has a debit balance of $400; a year-end inventory count reveals
$80 of supplies still on hand.
c. On November 1 of the current year, Rent Earned was credited for $1,500. This amount
represented the rent earned for a three-month period beginning November 1.
d. Estimated depreciation on store equipment is $600.
e. Accrued salaries amount to $1,400.