1. LO 4.1Which of the following is any reporting period shorter than a full year (fiscal or calendar) and can encompass monthly, quarterly, or half-year statements? 2. LO 4.1Which of the following is the federal, independent agency that provides oversight of public companies to maintain fair representation of company financial activities for investors to make informed decisions? 3. LO 4.1Revenues and expenses must be recorded in the accounting period in which they were earned or incurred, no matter when cash receipts or outlays occur under which of the following accounting methods? 4. LO 4.1Which of the following breaks down company financial information into specific time spans, and can cover a month, quarter, half-year, or full year? 5. LO
4.1Which of the following is a twelve-month reporting cycle that can begin in any month, except January 1, and records financial data for that twelve-month consecutive period? 6. LO 4.2Which type of adjustment occurs when cash is either collected or paid, but the related income or expense is notreportable in the current period? 7. LO 4.2Which type of adjustment occurs when cash
is not collected or paid, but the related income or expense is reportable in the current period? 8. LO 4.2If an adjustment
includes an entry to a payable or receivable account, which type of adjustment is it? 9. LO 4.2If an adjustment includes an entry to Accumulated Depreciation, which type of adjustment is it? 10. LO 4.2Rent collected in advance is an example of which of the following? 11. LO 4.2Rent paid in advance is an example of which of the
following? 12. LO 4.2Salaries owed but not yet paid is an example of which of the
following? 13. LO 4.2Revenue earned but not yet collected is an example of which of the following? 14. LO 4.3What adjusting journal entry is needed to record depreciation expense for the period? 15. LO 4.3Which of these transactions requires an adjusting entry (debit) to Unearned Revenue? 16. LO 4.4What critical purpose does the adjusted trial balance serve? 17. LO 4.4Which of the following accounts’ balance would be a different number on the Balance Sheet than it is on the adjusted trial balance? 18. LO 4.5On which financial statement would the Supplies account appear? 19. LO 4.5On which financial statement would the Dividends
account appear? 20. LO 4.5On which financial statement would the Accumulated Depreciation account appear? 21. LO 4.5On which two financial statements would the Retained Earnings account appear? Questions1. LO 4.1Describe the revenue recognition principle. Give specifics. 2. LO 4.1Describe the expense recognition principle (matching principle). Give specifics. 3. LO 4.2What parts of the accounting cycle require analytical processes, rather than methodical processes? Explain. 4. LO 4.2Why is the adjusting process needed? 5. LO 4.2Name two types of adjusting journal entries that are commonly made before preparing financial statements? Explain, with examples. 6. LO 4.2Are there any accounts that would never have an adjusting entry? Explain. 7. LO 4.2Why do adjusting entries always include both balance sheet and income statement accounts? 8. LO 4.2Why are adjusting journal entries needed? 9. LO 4.3If the Supplies account had an ending balance of $1,200 and the actual count for the remaining supplies was $400 at the end of the period, what adjustment would be needed? 10. LO 4.3When a company collects cash from customers before performing the contracted service, what is the impact, and how should it be recorded? 11. LO 4.3If the Prepaid Insurance account had a balance of $12,000, representing one year’s policy premium, which was paid on July 1, what entry would be needed to adjust the Prepaid Insurance account at the end of December, before preparing the financial statements? 12. LO 4.3If adjusting entries include these listed accounts, what other account must be in that entry as well? (A) Depreciation expense; (B) Unearned Service Revenue; (C) Prepaid Insurance; (D) Interest Payable. 13. LO 4.4What is the difference between the trial balance and the adjusted trial balance? 14. LO 4.4Why is the adjusted trial balance trusted as a reliable source for building the financial statements? 15. LO 4.5Indicate on which financial statement the following accounts (from the adjusted trial balance) would appear: (A) Sales Revenue; (B) Unearned Rent Revenue; (C) Prepaid Advertising; (D) Advertising Expense; (E) Dividends; (F) Cash. Exercise Set AEA1. LO 4.2Identify whether each of the following transactions, which are related to revenue recognition, are accrual, deferral, or neither.
EA2. LO 4.2Identify whether each of the following transactions, which are related to expense recognition, are accrual, deferral, or neither.
EA3. LO 4.2Identify which type of adjustment is indicated by these transactions. Choose accrued revenue, accrued expense, deferred revenue, or deferred expense.
EA4. LO 4.2The following accounts were used to make year-end adjustments. Identify the related account that is associated with this account (the other account in the adjusting entry).
EA5. LO 4.3Reviewing insurance policies revealed that a single policy was purchased on August 1, for one year’s coverage, in the amount of $6,000. There was no previous balance in the Prepaid Insurance account at that time. Based on the information provided:
EA6. LO 4.3On July 1, a client paid an advance payment (retainer) of $5,000 to cover future legal services. During the period, the company completed $3,500 of the agreed-on services for the client. There was no beginning balance in the Unearned Revenue account for the period. Based on the information provided,
EA7. LO 4.3Reviewing payroll records indicates that employee salaries that are due to be paid on January 3 include $3,575 in wages for the last week of December. There was no previous balance in the Salaries Payable account at that time. Based on the information provided, make the December 31 adjusting journal entry to bring the balances to correct. EA8. LO 4.3Supplies were purchased on January 1, to be used throughout the year, in the amount of $8,500. On December 31, a physical count revealed that the remaining supplies totaled $1,200. There was no beginning of the year balance in the Supplies account. Based on the information provided:
EA9. LO 4.3Prepare journal entries to record the following business transaction and related adjusting entry.
EA10. LO 4.3Prepare journal entries to record the following adjustments.
EA11. LO 4.3Prepare adjusting journal entries, as needed, considering the account balances excerpted from the unadjusted trial balance and the adjustment data.
EA12. LO 4.4Prepare an adjusted trial balance from the following adjusted account balances (assume accounts have normal balances). EA13. LO 4.4Prepare an adjusted trial balance from the following account information, considering the adjustment data provided (assume accounts have normal balances). Adjustments needed: Salaries due to administrative employees, but unpaid at period end, $2,000 Insurance still unexpired at end of the period, $12,000 EA14. LO 4.5From the following Company A adjusted trial balance, prepare simple financial statements, as follows:
Exercise Set BEB1. LO 4.2Identify whether each of the following transactions, which are related to revenue recognition, are accrual, deferral, or neither.
EB2. LO 4.2Identify whether each of the following transactions, which are related to expense recognition, are accrual, deferral, or neither.
EB3. LO 4.2Indicate what impact the following adjustments have on the accounting equation, Assets = Liabilities + Equity (assume normal balances).
Table4.5 EB4. LO 4.2What two accounts are affected by the needed adjusting entries?
EB5. LO 4.3Reviewing insurance policies revealed that a single policy was purchased on March 1, for one year's coverage, in the amount of $9,000. There was no previous balance in the Prepaid Insurance account at that time. Based on the information provided,
EB6. LO 4.3On September 1, a company received an advance rental payment of $12,000, to cover six months’ rent on an office building. There was no beginning balance in the Unearned Rent account for the period. Based on the information provided,
EB7. LO 4.3Reviewing payroll records indicates that one-fifth of employee salaries that are due to be paid on the first payday in January, totaling $15,000, are actually for hours worked in December. There was no previous balance in the Salaries Payable account at that time. Based on the information provided, make the December 31 adjusting journal entry to bring the balances to correct. EB8. LO 4.3On July 1, a client paid an advance payment (retainer) of $10,000, to cover future legal services. During the period, the company completed $6,200 of the agreed-on services for the client. There was no beginning balance in the Unearned Revenue account for the period. Based on the information provided, make the journal entries needed to bring the balances to correct for:
EB9. LO 4.3Prepare journal entries to record the business transaction and related adjusting entry for the following:
EB10. LO 4.3Prepare journal entries to record the following adjustments:
EB11. LO 4.3Prepare adjusting journal entries, as needed, considering the account balances excerpted from the unadjusted trial balance and the adjustment data.
EB12. LO 4.4Prepare an adjusted trial balance from the following adjusted account balances (assume accounts have normal balances). EB13. LO 4.4Prepare an adjusted trial balance from the following account information, considering the adjustment data provided (assume accounts have normal balances). Adjustments needed:
EB14. LO 4.5From the following Company B adjusted trial balance, prepare simple financial statements, as follows:
Problem Set APA1. LO 4.2Identify whether each of the following transactions, which are related to revenue recognition, are accrual, deferral, or neither.
PA2. LO 4.1To demonstrate the difference between cash account activity and accrual basis profits (net income), note the amount each transaction affects cash and the amount each transaction affects net income.
PA3. LO 4.2Identify which type of adjustment is indicated by these transactions. Choose accrued revenue, accrued expense, deferred revenue, deferred expense, or estimate.
PA4. LO 4.2Identify which type of adjustment is associated with this account, and what is the other account in the adjustment? Choose accrued revenue, accrued expense, deferred revenue, or deferred expense.
PA5. LO 4.2Indicate what impact the following adjustments have on the accounting equation, Assets = Liabilities + Equity (assume normal balances).
Table4.6 PA6. LO 4.2What two accounts are affected by each of these adjustments?
PA7. LO 4.3Using the following information:
PA8. LO 4.3Use the following account T-balances (assume normal balances) and correct balance information to make the December 31 adjusting journal entries. PA9. LO 4.3Use the following account T-balances (assume normal balances) and correct balance information to make the December 31 adjusting journal entries. PA10. LO 4.3Prepare journal entries to record the following transactions. Create a T-account for Interest Payable, post any entries that affect the account, and tally the ending balance for the account (assume Interest Payable beginning balance of $2,500).
PA11. LO 4.3Prepare journal entries to record the following transactions. Create a T-account for Prepaid Insurance, post any entries that affect the account, and tally the ending balance for the account (assume Prepaid Insurance beginning balance of $9,000).
PA12. LO 4.3Determine the amount of cash expended for Salaries during the month, based on the entries in the following accounts (assume 0 beginning balances). PA13. LO 4.3Prepare adjusting journal entries, as needed, considering the account balances excerpted from the unadjusted trial balance and the adjustment data.
PA14. LO 4.4Prepare an adjusted trial balance from the adjusted account balances; solve for the one missing account balance: Cash (assume accounts have normal balances). PA15. LO 4.4Prepare an adjusted trial balance from the following account information, considering the adjustment data provided (assume accounts have normal balances). Equipment was recently purchased, so there is neither depreciation expense nor accumulated depreciation. Adjustments needed:
PA16. LO 4.4Prepare an adjusted trial balance from the following account information, and also considering the adjustment data provided (assume accounts have normal balances). Equipment was recently purchased, so there is neither depreciation expense nor accumulated depreciation. Adjustments needed:
PA17. LO 4.5Using the following Company W information, prepare a Retained Earnings Statement.
PA18. LO 4.5From the following Company Y adjusted trial balance, prepare simple financial statements, as follows:
Problem Set BPB1. LO 4.1Identify whether each of the following transactions, which are related to revenue recognition, are accrual, deferral, or neither.
PB2. LO 4.1To demonstrate the difference between cash account activity and accrual basis profits (net income), note the amount each transaction affects cash and the amount each transaction affects net income.
PB3. LO 4.2Identify which type of adjustment is indicated by these transactions. Choose accrued revenue, accrued expense, deferred revenue, or deferred expense.
PB4. LO 4.2Identify which type of adjustment is associated with this account, and what the other account is in the adjustment. Choose accrued revenue, accrued expense, deferred revenue, or deferred expense.
PB5. LO 4.2Indicate what impact the following adjustments have on the accounting equation: Assets = Liabilities + Equity (assume normal balances).
Table4.7 PB6. LO 4.2What two accounts are affected by each of these adjustments?
PB7. LO 4.3Using the following information,
PB8. LO 4.3Use the following account T-balances (assume normal balances) and correct balance information to make the December 31 adjusting journal entries. PB9. LO 4.3Use the following account T-balances (assume normal balances) and correct balance information to make the December 31 adjusting journal entries. PB10. LO 4.3Prepare journal entries to record the following transactions. Create a T-account for Supplies, post any entries that affect the account, and tally ending balance for the account (assume Supplies beginning balance of $6,550).
PB11. LO 4.3Prepare journal entries to record the following transactions. Create a T-account for Unearned Revenue, post any entries that affect the account, tally ending balance for the account (assume Unearned Revenue beginning balance of $12,500).
PB12. LO 4.3Determine the amount of cash expended for Insurance Premiums during the month, based on the entries in the following accounts (assume 0 beginning balances). PB13. LO 4.3Prepare adjusting journal entries, as needed, considering the account balances excerpted from the unadjusted trial balance and the adjustment data.
PB14. LO 4.4Prepare an adjusted trial balance from the adjusted account balances; solve for the one missing account balance: Dividends (assume accounts have normal balances). Equipment was recently purchased, so there is neither depreciation expense nor accumulated depreciation. PB15. LO 4.4Prepare an adjusted trial balance from the following account information, considering the adjustment data provided (assume accounts have normal balances). Building and Equipment were recently purchased, so there is neither depreciation expense nor accumulated depreciation. Adjustments needed:
PB16. LO 4.4Prepare an adjusted trial balance from the following account information, and also considering the adjustment data provided (assume accounts have normal balances). Adjustments needed:
PB17. LO 4.5Using the following Company X information, prepare a Retained Earnings Statement:
PB18. LO 4.5From the following Company Z adjusted trial balance, prepare simple financial statements, as follows:
Thought ProvokersTP1. LO 4.1Assume you are the controller of a large corporation, and the chief executive officer (CEO) has requested that you explain to them why the net income that you are reporting for the year is so low, when the CEO knows for a fact that the cash accounts are much higher at the end of the year than they were at the beginning of the year. Write a memo to the CEO to offer some possible explanations for the disparity between financial statement net income and the change in cash during the year. TP2. LO 4.2Search the US Securities and Exchange Commission website (https://www.sec.gov/edgar/searchedga...anysearch.html), and locate the latest Form 10-K for a company you would like to analyze. Submit a short memo:
TP3. LO 4.3Search the web for instances of possible impropriety relating to earnings management. This could be news reports, Securities and Exchange Commission violation reports, fraud charges, or any other source of alleged financial statement judgment lapse.
TP4. LO 4.4Assume you are employed as the chief financial officer of a corporation and are responsible for preparation of the financial statements, including the adjusting process and preparation of the adjusted trial balance. The company is facing a slow year, and after your adjusting entries, the financial statements are accurately reflecting that fact. However, as you are discussing the matter with your boss, the chief executive officer (CEO), he suggests that you have the power to make further adjustments to the statements, and that you should use that power to “adjust” the profits and equity into a stronger position, so that investor confidence in the company’s prospects will be restored. Write a short memo to the CEO, stating your intentions about what you can and/or will do to make the financial statements more appealing. Be specific about any planned adjustments that could be made, assuming that normal period-end adjustments have already been reflected accurately in the financial statements that you prepared. TP5. LO 4.5Search the SEC website (https://www.sec.gov/edgar/searchedga...anysearch.html) and locate the latest Form 10-K for a company you would like to analyze. Submit a short memo:
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