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Exam 3: The Accounting Cycle: End of the Period

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Question 41

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When a company prepares closing entries,which one of the following is NOT a correct closing entry?

A) Debit Retained Earnings;credit Salaries Expense.
B) Debit Dividends;credit Retained Earnings.
C) Debit Service Revenue;credit Retained earnings.
D) All of the above are correct.

E) None of the above
F) B) and C)

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Question 42

True/False

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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.

A) True
B) False

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Question 43

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Which of the following is a permanent account?

The following table contains financial information for Trumpter's Inc.before closing entries: What is the amount of Trumpter's total liabilities?

Which accounting principle states that a company should "record revenues when they are earned"?

Current liabilities are liabilities due within one year.

According to the concept of expense recognition under accrual-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 current year.

Suppose a company rents office space for one year,paying $12,000 ($1,000/month)in advance on September 1.Record the adjusting entry on December 31.

For each transaction below,calculate the amount of revenue to be recognized in the current period using accrual-basis accounting: (a)Performed $24,000 of services during the month and received full cash payment from customers at the time of service. (b)Performed $9,000 of services during the month and billed customers.Customers are expected to pay next month. (c)Received $12,000 cash from customers for services to be provided next month.

The following is selected financial information for Osmond Dental Laboratories for 2015 and 2016: Osmond issued 2,000 shares of additional capital stock in 2016 for $20,000.There were no other capital transactions.Prepare a statement of stockholders' equity for the year ended December 31,2016.

For each of the following accounts,indicate whether the account is shown in the income statement or the balance sheet:

The following financial information is from Shovels Construction Company: What is the amount of current assets,assuming the accounts above reflect normal activity?

Which of the following is true about adjusting entries?

An example of an adjusting entry would not include:

The following information pertains to Sooner Company: Assuming that Sooner Company uses accrual-basis accounting,when would the company record the expense related to the supplies?

Adjusting entries involve recording events that have occurred but that have not yet been recorded by the end of the period.

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

The ending balance of Retained Earnings can best be described as:

The adjusting entry for a prepaid expense has the effect of reducing total assets and reducing net income.

Prepaid expenses involve payment of cash (or an obligation to pay cash)for the purchase of an asset before the expense is incurred.