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20.
The accountant at Abco, Inc. made an adjusting entry at the end of February to accrue
interest on a note receivable from a customer. The effect of this entry is to:
21.
The accounting concept/principle being applied when an adjustment is made is usually:
22.
The Interest Receivable account for February showed transactions totaling $17,000 and an
adjustment of $22,400.
23.
The balance in the Wages Payable account increased from $24,400 at the beginning of the
month to $30,000 at the end of the month. Wages accrued during the month totaled
$122,000.
24.
When a firm purchases supplies for use in its business, and the cost of the supplies
purchased is recorded as an asset, the following adjustment to recognize the cost of
supplies used will probably be required:
25.
When a firm purchases supplies for its business:
26.
The effect of an adjustment on the financial statements is usually to:
27.
A journal:
28.
A ledger:
29.
A chart of accounts:
Essay Questions
30.
At the beginning of the current fiscal year, Surrey Corp.'s balance sheet showed assets of
$1,350,000 and liabilities of $1,050,000. During the year, liabilities decreased by $70,000.
Net Income for the year was $350,000, and net assets at the end of the year were
$386,000. There were no changes in paid-in capital during the year.
Calculate the dividends, if any, declared during the year.
Calculate the total assets at the end of the year.
A
=
L
+
SE
Beginning
$1,350,000
=
$1,050,000
+
(1)
Changes
-70,000
+
+350,000
Net
income
–(2)
Dividends
Ending
(4)
(3)
$386,000
31.
At the beginning of the current fiscal year, the balance sheet of Arches Co. showed
liabilities of $760,000. During the year liabilities increased by $20,000, assets increased by
$110,000, and paid-in capital increased by $40,000 to $330,000. Dividends declared and
paid during the year were $120,000. At the end of the year, stockholders' equity totaled
$804,000. Calculate net income or loss for the year.
SE
A
=
L
+
PIC
+
RE
Beginning
$(5)
=
$760,000
+
(4)
+
(6)
Changes
+110,000
+20,000
+
+40,000
(7)
Net
income
–
120,000
Dividends
Ending
(3)
(2)
$330,000
(1)
32.
Using the column headings provided below, show the effect, if any, of the transaction entry
or adjusting entry on the appropriate balance sheet category or on the income statement by
entering the account name, amount, and indicating whether it is an addition (+) or
subtraction (-). Column headings reflect the expanded balance sheet equation; items that
affect net income should not be shown as affecting stockholders' equity.
(1.) The firm borrowed $4,000 from the bank; a short-term note was signed.
(2.) Merchandise inventory costing $1,500 was purchased; cash of $400 was paid and the
balance is due in 30 days.
(3.) Employee wages of $2,000 were accrued at the end of the month.
(4.) Merchandise that cost $700 was sold for $900 in cash.
(5.) This month's rent of $1,400 was paid.
(6.) Revenues from services during month totaled $13,000. Of this amount, $4,000 was
received in cash and the balance is expected to be received within 30 days.
(7.) During the month, supplies were purchased on account at a cost of $1,040, and
debited into the Supplies (asset) account. A total of $800 of supplies were used during the
month.
(8.) Interest of $480 has been earned on a note receivable, but has not yet been received.
Transaction/Adjustment
Assets
Liabilities
Stockholders’ Equity
Net Income
1.
2.
3.
4.
5.
6.
7.
8.
33.
Using the column headings provided below, show the effect, if any, of the transaction
entry or adjusting entry on the appropriate balance sheet category or on the income
statement by entering the account name, amount, and indicating whether it is an addition
(+) or subtraction (-). Column headings reflect the expanded balance sheet equation;
items that affect net income should not be shown as affecting stockholders' equity.
(1.) During the month, the board of directors declared a cash dividend of $2,400, payable
next month.
(2.) Employees were paid $3,800 in wages for their work during the first three weeks of
the month.
(3.) Employee wages of $1,200 for the last week of the month have not been recorded.
(4.) Merchandise that cost $1,800 was sold for $2,700. Of this amount, $2,000 was
received in cash and the balance is expected to be received within 30 days.
(5.) A contract was signed with a local radio station for a $200 advertisement; the ad was
aired during this month but will not be paid for until next month.
(6.) Store equipment was purchased at a cash price of $600. The original list price of the
equipment was $800, but a discount was received.
(7.) Received $360 of interest income for the current month.
(8.) Accrued $620 of interest expense at the end of the month.
Transaction/
A
djustment
Assets
Liabilities
Stockholders’
Equity
Net
Income
1.
2.
3.
4.
5.
6.
7.
8.
