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Exam 2: Review of the Accounting Process

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Question 21

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Pat's Custom Tuxedo Shop maintains its records on the cash basis. During this past year Pat's collected $42,000 in tailoring fees, and paid $14,000 in expenses. Depreciation expense totaled $2,000. Accounts receivable increased $1,500, supplies increased $4,000, and accrued liabilities increased $2,500. Pat's accrual basis net income was:

A) $18,000.
B) $34,000.
C) $23,000.
D) $29,000.

E) A) and B)
F) A) and C)

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Question 22

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Permanent accounts would not include:

A) Interest expense.
B) Wages payable.
C) Prepaid rent.
D) Unearned revenues.

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

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Question 23

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Recording revenue that is earned, but not yet collected, is an example of:

-Sold merchandise to a customer in exchange for a promissory note.

When a business makes an end-of-period adjusting entry with a debit to supplies expense, the usual credit entry is made to:

Flint Hills, Inc. has prepared a year-end 2013 trial balance. Certain accounts in the trial balance do not reflect all activities that have occurred. Required: Prepare adjusting journal entries, as needed, for the following items. 1. The Supplies account shows a balance of $540, but a count of supplies reveals only $210 on hand. 2. Flint Hills initially records the payments of all insurance premiums as expenses. The trial balance shows a balance of $420 in Insurance expense. A review of insurance policies reveals that $125 of insurance is unexpired. 3. Flint Hills employees work Monday through Friday, and salaries of $2,400 per week are paid each Friday. Flint Hills' year-end falls on Tuesday. 4. On December 31, 2013, Flint Hills received a utility bill for December electricity usage of $190 that will be paid in early January.

Yummy Foods purchased a two-year fire and extended coverage insurance policy on August 1, 2013, and charged the $4,200 premium to Insurance expense. At its December 31, 2013, year-end, Yummy Foods would record which of the following adjusting entries?

Molly's Auto Detailers maintains its records on the cash basis. During 2013, Molly's collected $72,000 from customers and paid $21,000 in expenses. Depreciation expense of $5,000 would have been recorded on the accrual basis. Over the course of the year, accounts receivable increased $4,000, prepaid expenses decreased $2,000, and accrued liabilities decreased $1,000. Molly's accrual basis net income was:

Received payment for services to be performed next year.

Rite Shoes was involved in the transactions described below. Required: Prepare the appropriate journal entry for each transaction. If an entry is not required, state "No Entry." 1. Purchased $8,200 of inventory on account. 2. Paid weekly salaries, $920. 3. Recorded sales for the first week: Cash: $7,100; On account: $5,300. 4. Paid for inventory purchased in event (1). 5. Placed an order for $6,200 of inventory.

On September 15, 2013, Oliver's Mortuary received a $6,000, nine-month note bearing interest at an annual rate of 10% from the estate of Jay Hendrix for services rendered. Oliver's has a December 31 year-end. What adjusting entry will the company record on December 31, 2013?

Prepare an income statement for China Tea Company for the year ended December 31, 2013.

Dave's Duds reported cost of goods sold of $2,000,000 this year. The inventory account increased by $200,000 during the year to an ending balance of $400,000. What was the cost of merchandise that Dave's purchased during the year?

On December 31, 2013, the end of Larry's Used Cars' first year of operations, the accounts receivable was $53,600. The company estimates that $1,200 of the year-end receivables will not be collected. Accounts receivable in the 2013 balance sheet will be valued at:

Collected a note receivable at maturity, including the interest that had already been accrued.

The sale of merchandise on account would be recorded in a sales journal.

Adjusting entries are primarily needed for:

Kline's 12/31/13 total current liabilities:

Based on the information presented above, prepare the 2013 Income Statement for Krafty Foods.

The following is selected financial information for Osmond Dental Laboratories for 2012 and 2013: Osmond issued 2,000 shares of additional capital stock in 2013 for $20,000. There were no other capital transactions. Required: Prepare a statement of shareholders' equity for Osmond Dental Laboratories for the year ended December 31, 2013.