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Exam 3: The Financial Reporting Process

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Question 61

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A list of all accounts and their balances after updating account balances for adjusting entries is referred to as:

A) A trial balance.
B) An adjusted trial balance.
C) A post-closing trial balance.
D) An accounting trial balance.

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

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Question 62

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The closing entry for revenue accounts includes a debit to Retained Earnings and a credit to all revenue accounts.

A) True
B) False

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Question 63

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Under cash-basis accounting,the timing of cash inflows and outflows exactly matches the reporting of revenues and expenses in the income statement.

The December 31,2012,post-closing trial balance for Strong Corporation is presented below: $\begin{array} { l r r } & { \text { Debits } } & \text { Credits } \\\hline \text { Cash } & \$ 22,500 & \\\text { Investments } & 55,000 & \\\text { Accounts Receivable } & 22,500 & \\\text { Prepaid Insurance } & 4,500 & \\\text { Supplies } & 100,000 & \\\text { Land } & 45,000 & \\\text { Buildings } & 277,500 & \\\text { Accumulated Depreciation } & & 80,000 \\\text { Accounts Payable } & & 37,500 \\\text { Notes Payable, due 2013 } & & 65,000 \\\text { Interest Payable } & & 10,000 \\\text { Notes Payable, due 2025 } & & 120,000 \\\text { Common Stock } &&150,000 \\\text { Retained Earnings } && 64,500 \\\hline \text { Totals } & \$ 527,000 & \$ 527,000 \end{array}$ Prepare a classified balance sheet for Strong Corporation at December 31,2012.

The revenue recognition principle states that we record revenue in the period in which we collect cash.

The adjusting entry required to record accrued expenses includes:

The Supplies account is an example of an accrued expense.

Describe what is meant by prepaid expenses and give two examples.

The primary purpose of closing entries is to:

Under cash-basis accounting,if costs associated with producing revenue in the current year are not paid in cash until the following year,the costs should be expensed in the following year.

An adjusted trial balance:

Once the adjusted trial balance is complete,financial statements are prepared.

Prepayments occur when:

If the beginning balance of Retained Earnings equals $12,000,the ending balance of Retained Earnings equals $15,000,and dividends for the year equal $1,000,then net income for the year equals $4,000.

The adjusting entry for a prepaid expense always includes a debit to an expense account and a credit to a liability account.

The adjusting entry for an accrued expense has the effects of decreasing net income and decreasing liabilities.

Which of the following accounts will NOT be involved in closing entries?

Which of the following accounts is(are) listed in a post-closing trial balance?

The adjusting entry required when amounts previously recorded as unearned revenues are earned includes:

The post-closing trial balance does not include any assets or liabilities,because these accounts all have zero balances after closing entries.