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Exam 3: The Adjusting Process

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Question 1

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Which of the following pairs of accounts could not appear in the same adjusting entry?

A) Service Revenue and Unearned Revenue
B) Interest Income and Interest Expense
C) Rent Expense and Prepaid Rent
D) Salaries Payable and Salaries Expense

E) B) and C)
F) C) and D)

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B

Question 2

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Two income statements for Toby Sam Enterprises are shown below: $\quad$$\quad$$\quad$$\quad$$\quad$$\text { Toby Sam Enterprises }$ $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Income Statement }$ $\quad$$\text { For the Years } 2 \text { and } 1 \text { Ending December } 31$ $\begin{array}{l}\hline \begin{array}{lll}\\ \text {Fees earned }\\ \text {Operating expenses }\\ \text {Operating income}\\\end{array}\begin{array}{lll}\underline {\text { Year 2 }} \\\$ 674,350 \\\underline {472,045} \\\underline {\$ 202,305 }\\\end{array}\begin{array}{lll}\underline {\text { Year } 1}\\\$ 520,600\\\underline {338,390}\\\underline {\$ 182,210}\end{array}\end{array}$ Prepare a vertical analysis of Toby Sam Enterprises' income statements.Has operating income increased or decreased as a percentage of revenue?

A) increased by 5%
B) increased by 111%
C) decreased by 5%
D) decreased by 111%

E) B) and C)
F) All of the above

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Question 3

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The matching concept supports matching expenses with the related revenues.

What is the purpose of the adjusted trial balance?

If the adjustment of the unearned rent account at the end of the period to recognize the amount of rent earned is inadvertently omitted,the net income for the period will be understated.

A business pays biweekly salaries of $20,000 every other Friday for a ten-day period ending on that day.The last payday of December is Friday,December 27.Assume the next pay period begins on Monday,December 30 and the proper adjusting entry is journalized at the end of the fiscal period December 31.The entry for the payment of the payroll on Friday,January 10 includes a

On November 15,Great Designs Company purchased an advertising campaign for the month of December.Great Designs paid cash of $2,700 in advance.The advertising campaign ran in December. a. Prepare all necessary journal entries for the advertising campaign for November and December. b. Explain why you prepared this/these journal entries.

An example of deferred revenue is Unearned Rent.

The updating of accounts is called the adjusting process.

Prepaid expenses are eventually expected to become

Explain the differences between a. Accrued revenues and unearned revenues. b. Accrued expenses and prepaid expenses. c. Give an example of each.

The supplies account had a beginning balance of $1,750.Supplies purchased during the period totaled $3,500 . At the end of the period before adjustment, $350 of supplies were on hand.Prepare the adjusting entry for supplies.

Classify the following items as: 1. prepaid expense,2. unearned revenue,3. accrued expense,or 4. accrued revenue. a. fees received but not yet earned b. fees earned but not yet received c. paid premium on a one-year insurance policy d. property tax owed to be paid beginning of next year

The adjusted trial balance verifies that total debits equals total credits before the adjusting entries are prepared.

Accrued expenses are ordinarily reported on the balance sheet as

Which of the following accounts would likely be included in a deferral adjusting entry?

If there is a balance in the unearned subscriptions account after adjusting entries are made,it represents an

The prepaid insurance account had a beginning balance of $6,600 and was debited for $2,300 for premiums paid during the year.Journalize the adjusting entry required at the end of the year,assuming the amount of unexpired insurance related to future periods is $4,100.

For each of the following errors,considered individually,indicate whether the error would cause the adjusted trial balance totals to be unequal.If the error would cause the adjusted trial balance total to be unequal,indicate whether the debit or credit total is higher and by how much. a- The adjustment for unearned fees of $3,260 was journalized as a debit to Accounts Payable for $3,260 and a credit to Fees Earned of $3,260. b- The adjustment for supplies expense of $425 was journalized as a debit to Supplies Expense for $542 and a credit to Supplies for $425.

Which of the following is not true regarding depreciation?