Closing Journal Accounts Chapter 3

Which account would not appear in a closing journal entry?

1. Depreciation expense
2. Cost of Goods Sold
3. Rent receivable
4. Dividends
5. Service revenue

Adjusting Entry Identification Chapter 3

Which of the following would not be considered an adjusting entry?

1. Debit insurance expense, credit prepaid insurance
2. Debit unearned revenue, credit revenue
3. Debit accounts payable, credit cash
4. Debit accounts receivable, credit service revenue

Current Assets Chapter 3

The Kelly Company purchased a building for $75,000 in cash. What is the effect on current assets?

1. Increase in current assets
2. Decrease in current assets
3. No effect on current assets
4. Unable to determine

Revenue Journal Entry Chapter 3

Which account is least likely to be debited when revenue is earned?

1. Unearned revenue
2. Cash
3. Accounts Receivable
4. Accounts Payable

Revenue Recognition Chapter 3

On December 15, Year 1, a company receives an order from a customer for services to be performed on December 28, Year 1. Due to a backlog of orders, the company does not the perform the services until January 3, Year 2. The company sends a bill to the customer on January 4, Year 2 and the customer pays for the services on January 10, Year 2. When should revenue be recorded by the company, assuming the accrual method of accounting?

1. Dec. 15, Year 1
2. Dec. 28, Year 1
3. Jan. 3, Year 2
4. Jan. 4, Year 2
5. Jan. 10, Year 2

Revenue Recognition Chapter 3

Which of the following is a requirement for revenue recognition under accrual accounting?

1. The customer has paid for the goods or services
2. The customer has signed a contract ordering goods are services
3. Delivery of the goods or services has been scheduled
4. The price of the goods or services is fixed
5. All of the above requirements

Determining Net Income From Transactions Chapter 3

An electronics store had the following transactions in February:

1. Sold $90,000 of goods to customers, receiving $65,000 in cash and the remainder on account. The inventory had an original cost of $36,000.
2. Purchased $16,000 of inventory, paid $12,000 in cash and the rest remained on account.
3. Paid $2,000 for wages that were owed to employees from January.
4. Received a customer order and payment of $9,000 for an audio system to be delivered and installed in March
5. By February 28, accrued wages were $14,000.

What would Net Income (on an accrual basis) for the month of February would be?

Revenue Recognition Chapter 3

An advertising agency receives a $10,000 cash deposit from a client on February 15th for an advertising campaign which will begin in March. Which of the following statements is true for the agency (which uses accrual accounting)?

1. A liability will be reported on the balance sheet at the end of February
2. A prepaid asset will be reported on the balance sheet at the end of February
3. Revenue will be recorded and reported on the income statement for February
4. Cash from operations will be reported on the statement of cash flows in March
5. All of the above are true

Adjusting Entry - Wage Expense Chapter 3

A company operates five days per week with a daily payroll of $6,000. Employees are paid every Friday. The last day of the accounting period is Thursday, October 31. What is the amount of Wage Expense to be recorded on the next payday, Friday, November 1?

1. $0
2. $30,000
3. $24,000
4. $12,000
5. $6,000

Closing Process Chapter 3

After the closing process is complete, which of the following is false?

1. All accounts with a non-zero balance will be shown on the balance sheet.
2. The net income or net loss and the dividends for the period have been transferred to the retained earnings account
3. All temporary accounts have a zero balance
4. None of the above are false

Determining Net Income From Journal Entries Chapter 3

The following journal entries were recorded by a company during the month of September. What was net income for the month?

Determine Net Income for September

Adjusting Entry - Salaries Payable Chapter 3

Salaries payable at the end of the period was $500. Salary expense for the period was $1,100 and $1,400 was paid to employees in cash.

What was salaries payable at the beginning of the period?

Prepaid Rent Chapter 3

1. $7,400
2. $5,600
3. $7,100
4. $8,600
5. None of the above

When You Forget to do Adjusting Entries Chapter 3

For each of the following independent situations, determine the effect of ignoring the required 12/31 year-end adjusting entry. Would assets, liabilities, and equity be understated (U) or overstated (O) if the entry is not made? If there would be no effect, leave the cell blank.

The Effect of Transactions Chapter 3

For each transaction listed, determine the effect on the February financial statements. Indicate + for increase, or – for decrease. Leave the cell blank if there is no effect.

Account Classifications Chapter 3

1. Determine Total assets on December 31, Year 1
2. Determine Current Liabilities on December 31, Year 1
3. Determine Net Income for the year ended December 31, Year 1
4. Determine the total amount of Common Stock on December 31, Year 1

Revenue and Expense Recognition Chapter 3

Columbia, Inc. had the following transaction in February:

1. Columbia sold inventory for $7,200. $3,500 was received in cash and the remainder was on account. The inventory cost was $4,000.
2. Columbia purchased new inventory costing $6,000. $3,000 was paid in cash and the remainder was on account.
3. Columbia paid $1,200 for February wages and an additional $400 for wages incurred in the last week of January. $300 of wages incurred in the last week of February will be paid March 5.
4. Columbia received $1,000 from customers at deposits on orders to be delivered March 9.
5. Columbia collected $800 on accounts receivable.

Columbia should report how much revenue in February?

1. $7,200
2. $5,300
3. $8,000
4. $9,000
5. None of the above

Columbia should report how much expense in February?

1. $11,200
2. $5,900
3. $5,500
4. $5,200
5. None of the above

Adjusting Journal Entries Chapter 3

Additional Information:

1. Supplies used during the year totaled $750.
2. Of the balance in the Unearned Revenue account, 60% had been completed.
3. Accrued salaries at December 31 were $900
4. On December 1, the company prepaid $2,400 for 4 months of rent. This transaction was recorded with a debit to Rent Expense
5. The note is a 6-month, 4% loan obtained from the bank on November 1.

Required:

1. Prepare all necessary adjusting entries as of December 31. (There are 5 of them.)
2. Determine Net Income for the year ending December 31.

Adjusting Journal Entries Chapter 3

1. Of the balance in the unearned service revenue accounts, $400 had not been earned by year end.
2. On 12/1/Y1, the company rented office space for $1,200 per month for three months and paid the entire $3,600 in cash.
3. On December 1, Year 1, the company paid $900 for six months of advertising.
4. A count of supplies on December 31, Year 1 showed $200 of supplies still on hand.
5. The equipment was purchased on Jan. 1, Year 1. The useful life is estimated to be 10 years. Straight-line depreciation is used and no salvage value is expected.
6. As of 12/31/Y1, salaries of $800 had been earned by employees but still not be paid until 1/1/Y2.

Year End Closing & Account Classification Chapter 3

The following accounts reflect the correct Year 1 year-end balances after adjustment but before closing.

1. Determine total assets
2. Determine total liabilities
3. What are retained earnings on the Dec. 31, Year 1 balance sheet?
4. Prepare the correct entry to close the Income Summary accounts.