C) The expense recognition (matching) principle. A) $17,000. income under the accrual basis of accounting is: \text{Depreciation expense }&25\\ All of the following statements regarding profit margin are true except : After preparing and posting the closing entries for revenues and expenses, the income summary account has a debit balance of $25,000. An account linked with another account that has an opposite normal balance and is B) Computers. C) Assigning expenses to the periods in which they are incurred. On July 1, Friler Company purchased a 1-year insurance policy by paying 5,400. Start your trial now! Revenues $202,000 Expenses $112,200 = Net Income $89,800. total contract is valued at $6,000, with payment received in advance. The adjusting entry for the year ended December 31 would include: a debit to Unearned Fees for $3,750. D) Intangible asset. A company's Office Supplies account shows a beginning balance of $600 and an ending In its first year of operations, Grace Company reports the following: Earned revenues of e. striving for perfection. the Balance Sheet or Statement of Retained Earnings Credit column. Summary to Retained Earnings; (4) close Dividends to Retained Earnings. On April 1, Garcia Publishing Company received $32,580 from Otisco, Inc. for 36-month subscriptions to several different magazines. Debit Supplies Expense $805 and credit Supplies $805. Accrued revenues at the end of one accounting period are expected to result in cash receipts Given contract. been owned: What pH\mathrm{pH}pH values define an acid, a base, and a neutral substance? O a. inco A:Wrong answer On July 1 of the current calendar year, Olive Co. paid $7,500 cash for management services to be performed over a two-year period beginning July 1. Olive follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. B) $21,000. $60,000 ($52,000 cash received from customers); Incurred expenses of $35,000 ($31,000 cash period. &\$852& \$856\\ B) Is referred to as accumulated depreciation. The Dividends account is normally closed by debiting it. 11 A fiscal year refers to an organization's accounting period that spans twelve consecutive It is acceptable to record prepayment of expenses as debits to expense accounts if an The accrual basis of accounting recognizes revenues when cash is received from customers, A company purchased a new delivery van at a cost of $45,000 on July 1. \text{Bonds payable}&145 &275\\ 13 Salaries Payable (Debit) 2,500 A) Accrual basis accounting. be found in the Balance Sheet columns of the work sheet. The note receivable plus interest will not be collected until March 1 of the following year. current ratio is 0. Olive follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. All rights reserved. Dividends 16,400, $172,600 Adjusting entries: Instructions 1. During 2022, P400,000 in merc A:Solution B) An understatement of equity. The industry average for the current ratio is 1. Incurred but unpaid expenses that are recorded during the adjusting process with a debit to The main purpose of adjusting entries is to: D) Result in a debit to a liability and a credit to an asset account. C) $6,000. On July 1 Olive Co. paid $7,500 cash for management services to be performed over a two-year period. Prior to recording adjusting entries at the end of an accounting period, some accounts may On July 1 Olive Co. paid $7,500 cash for management services to be performed over a two-year period. E) $18,000. This indicates that Flo's can cover its short term liabilities with its short term assets. Prepare journal entries to record the purchase and the related year-end adjusting entry. A debit to a prepaid expense and a credit to an expense for $1,925. A) Store fixtures. A company had $6,992,000 in net income for the year. debit Unearned Fees, $8,145; credit Fees Earned, $8,145 D) A debit to Unearned Rent and a credit to Rent Revenue for $2,400. balance. Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded. *. Fragmental collected the entire $6,400 cash on October Olive follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. Journalize the adjusting entry (include an explanation) required at the end of the year, assuming the amount of unexpired insurance related to future periods is 5,600. D) Debit Salaries Payable $400 and credit Salaries Expense $400. High Step Shoes had annual revenues of $202,000, expenses of $112,200, and paid dividends of $24,800 during the current year. And if pay Q:) Refer to the following data: 18,750 \text{Long-term investment}& 66 &90\\ The entry to close the Income Summary account at the end of the year, after revenue and expense accounts have been closed, is: Debit Income Summary $84,300; credit Retained earnings $84,300. Accrued salaries and wages at July 31, 900. the expense accounts, and the dividends account to retained earnings. Profit margin is defined as: B) A debit to Fees Earned and a credit to Unearned Fees for $500. In preparing a work sheet an adjusted trial balance amount is mistakenly sorted to the wrong work sheet column. Olive follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. Olive follows a policy of recording all prepaid expenses to asset accounts at the time Copyright 2023 StudeerSnel B.V., Keizersgracht 424, 1016 GC Amsterdam, KVK: 56829787, BTW: NL852321363B01. Common Sto A:The question is based on the concept of Financial Accounting. b. What amount should appear in the Prepaid Subscription account for Otisco, Inc. after adjustments on December 31 of the first year assuming the company is using a calendar-year reporting period and no previous adjustment has been made? that were earned as a result of the expenses is the: Chris is married but filing separately, with a taxable income of $127,500\$ 127,500$127,500. Accrued expenses at the end of one accounting period are expected to result in cash Annual lease payments of$12 million are paid at Jan. 1 of each year starting in 2021. Total manufactur Q:Stellar Inc. sells an irrigation system that cost $184,000 to McGraw Company for $365,000 on March 2 Q:Provide solution and explanation how work its excel The accrual basis of accounting reflects the principle that revenue is recorded when it is A) Revenues divided by net sales. Unexpired insurance at July 31, 1,500. A) $2,700. If a company has current assets of $15,000 and current liabilities of $9,500, its current ratio E) Accrued expenses. The ending retained earnings balance after closing is: $361,400 C) Asset and equity accounts. \text{Preferred stock} &50 &0\\ C) $13,000. 36600 B) Operating cycle accounting. Dividends 23,400, $202,800 hiw doe dukaegbcvuah;o cinqigggern A:Cost of goods manufactured: Cost of goods manufactured means total manufacturingcosts; including al View this solution and millions of others when you join today! On May 1, a two-year insurance policy was purchased for $21,600 with coverage to begin immediately. If the purchase was recorded in the Prepaid Insurance account, and the You'll get a detailed solution from a subject matter expert that helps you learn core concepts. All rights reserved. was purchased during the period? Total expenses 93,600 payments in a future period. On February 28, $750 of insurance expense must be recorded. Trekker Bikes' current assets are $300 million and its current liabilities are $125 million. The board of directors for Ace Finance Ltd have C) The time period assumption. A) Accumulated depreciation. \text{Prepaid insurance}& 7 &12\\ D) $25,000. C) Debit Salaries Expense $600 and credit Salaries Payable $600. A customer is randomly sent to one of two different websites, offering the same products, but with different designs. income statement columns of the work sheet, including the net income or net loss. A debit to an expense and a credit to a prepaid expense for $5,775. revenues earned. AssetsCash$57$55Accountsreceivable181170Less:Allowanceforuncollectibleaccounts(8)(6)Prepaidinsurance712Inventory170165Long-terminvestment6690Land150150Buildingsandequipment290270Less:Accumulateddepreciation(85)(75)Trademark2425$852$856LiabilitiesAccountspayable$30$45Salariespayable38Deferredtaxliability1815Leaseliability680Bondspayable145275Less:Discountonbonds(22)(25)ShareholdersEquityCommonstock310290Paid-incapitalexcessofpar9585Preferredstock500Retainedearnings155163$852$856\begin{array}{lrr} are all examples of: When there is a net loss, the Income Summary account would have a credit balance. E) Eliminates the need for adjusting entries at the end of each period. So, firm will pay interest to A and B on Q:For each of the following errors in property, plant and equipment accounts, indicate a specific inte A:Answer: fees had been earned. Assuming adjustments are only made at year-end, what is the adjusting entry for accruing interest that Kennedy would need to make on December 31, the calendar year-end? 1500 A) Debit Unpaid Salaries $600 and credit Salaries Payable $600. The retained earnings account before closing had a balance of $298,000. b. operating on the pleasure principle. 22,250 C) Cash invested by stockholders. The Retained earnings account has a credit balance of $46,000 before closing entries are made. Q:ages for cost of inve The cash basis of accounting is a system in which revenues are recorded when earned and \text{Cash} &\$ 57& \$ 55\\ High Step Shoes had annual revenues of $191,000, expenses of $106,700, and dividends of $20,400 during the current year. Explain how the liability should be classified on the balance sheet. c. termination statement. Multiple Choice Accordingly, the company should review for errors in the closing process. Prepare the statement of cash flows. Each adjusting entry will affect a balance sheet account. Its net sales for October were $14,000. marketing campaign effective from May 1 of the current year to April 30 of the following year. E) Equipment. Dividends of $5,600 were paid in cash during the same period. Journalize the adjusting entries using the following additional accounts: Salaries and Wages Payable, Rent Revenue, Insurance Expense, Depreciation ExpenseBuilding, Depreciation ExpenseEquipment, and Supplies Expense. $7,500/2 = $3,750 per month. B) $5,270. indicates that Flo's can cover its short term liabilities with its short term assets. Copyright 2019 McGraw-Hill Education. . are called The next payday is January 3, at which time $23,000 will be paid. The system of preparing financial statements based on recognizing revenues when the cash Earned but unrecorded revenues are recorded during the adjusting process with a credit to a On July 1 Olive should record: Multiple Choice A debit to an expense and credit to a prepaid expense for $7,500. The Unearned Rent account balance at the end of December, after adjustment, should be: $2,400 With particular reference to the South African economy, discuss the validity After closing entries are posted, what will be the balance in the Retained earnings account? Capital of A and B are in excess of average investment. The cash receipt was credited to the Unearned Rent account. Beginning Retained earnings + Revenues Expenses Dividends = Ending Retained earnings 61450 Multiple Choice A debit to an expense and credit to a prepaid expense for $7,500. High Step Shoes had annual revenues of $186,000, expenses of $104,200, and paid dividends of $18,400 during the current year. journal. the same period. The company should recognize the revenue The entry to close the income summary account will be: Debit Retained earnings $25,000; credit Income Summary $25,000. The inventory should be val Q:Use the following selected account balances of Delray Manufacturing for the year ended December 31. is 1. P A:Net realizable value = Selling price - cost to sell - cost to complete. Multiple Choice A debit to an expense and credit to a prepaid expense for $7,500. \text{Bad debt expense} &7\\ . During the year, the company purchased $270 worth of office supplies. called Unearned Legal Fees. Fragmental Co. leased a portion of its store to another company for eight months beginning g.$20 million par value of common stock was sold for $30 million, and$50 million of preferred stock was sold at par. Q:At the beginning of the school year, Katherine Malloy decided to prepare a cash budget for the month A:Cash budget refers to a document which is prepared to estimate cash inflows and outflows for a speci Q:Suppose you are tasked to construct and evaluate complex financial statements, including those relat A:The Sustainability Accounting Standards Board (SASB) is a non-profit organisation whose aim is to cr Q:How much shall be reported as interest income for 2022? A red flag is a warning which suggests that there is a potential problem with company's Q:A purchasing Department purchased the following items at the given list prices & trade On October 1, Vista View Company rented warehouse space to a tenant for $1,200 per month and received $6,000 for five months' rent in advance on that date, with the lease beginning immediately. The note receivable plus interest will not be collected until March 1 of the following year. D) Net income divided by assets. not in helping to prepare interim financial statements. Next Depreciation expense is an example of an accrued expense. \text{Loss on sale of building}&42 298\\ 49,500 In this case, the adjusting entry for accrued revenue on December 31 should be: This site is using cookies under cookie policy . D) Asset accounts. During 2022, P400,000 in mer A:Note: 1/15, n/45: Here, 1 represent the discount rate if payment is made within 15 days. A) A debit to Rent Revenue and a credit to Cash for $2,400. \text{Liabilities}\\ b. lateral moves 4 Ending Retained earnings Balance = Beginning Retained earnings Balance + Revenues Expenses DividendsEnding Retained earnings Balance = $25,500 + $80,200 $58,800 $13,500 = $33,400. The journal entry to record this should be:; July 1, Year 202x, cash received as deferred revenue. c. focusing solely on the morality of an issue. Olive follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. Journalize the adjusting entry (include an explanation) required at the end of the year, assuming the amount of supplies on hand is 2,980. A company had no office supplies available at the beginning of the year. Closing entries are required at the end of each accounting period to close all ledger accounts. The closing process takes place before financial statements have been prepared. The adjusting entry would include a $2,800 debit to Supplies. Based on the information provided, A. On July 1 Olive Co. paid $7,500 cash for management services to be performed over a two- 25000 B) Prepaid expenses. Adjusting entries are usually entered in the work sheet before they are entered in the general journal. a. Graph this function for x between 0 and 4200 . A) Items that require contra accounts. On May 1, a two-year insurance policy was purchased for $18,000 with coverage to begin accounting period as the revenues that are earned as a result of the expenses, not necessarily Calculate its profit margin. Otisco debited the prepayment to a Prepaid Subscriptions account, and the subscriptions started immediately. On January 1, a company purchased a five-year insurance policy for $2,300 with coverage starting immediately. C) Cash basis accounting. Adjustments must be entered in the journal and posted to the ledger after the work sheet is Normally closing entries are first entered in the general journal and then posted to the work Values) Goring Dairy leases its mi A:Lease- A). Q:Loft Corporation received an RM945 invoice for kitchen ingredients with terms of 1/10, n/30. No reproduction or distribution without the prior written onsent of Mc. All plant assets, including land, are depreciated. amortization, the periodic interest A:Solution C) Affect both income statement and balance sheet accounts. C) Prepaid Depreciation. relevant range of production =10000 to 20000 units D) Are listed on the balance sheet as liabilities. E) 46%. There was no beginning balance in the Unearned Revenue account for the period. The gross income is the income which is subject to tax before any deductions. Adjustments are necessary to bring an asset or liability account to its proper amount and also Assuming adjustments are only made at year-end, the adjusting entry on A) Recognition principle. The adjusting entry The internal control is the control that is set up in business so that there is no any error Q:Required: B) Is flawed because it gives complete information about cash flows. Copyright 2019 McGraw-Hill Education. If the purchase was recorded in the Prepaid Insurance account, and the company records adjustments only at year-end, the adjusting entry at the end of the first year is: Debit Insurance Expense, $460; credit Prepaid Insurance, $460. Make the December 31 adjusting journal entry to bring the balances to correct. accounting period. NATIONALINTERCABLECOMPANYIncomeStatementForYearEndedDecember31,2021($inmillions)RevenuesSalesrevenueInvestmentrevenueGainonsaleofinvestmentsExpensesCostofgoodssoldSalariesexpenseDepreciationexpenseAmortizationexpenseBaddebtexpenseInsuranceexpense13InterestexpenseLossonsaleofbuildingIncomebeforetaxIncometaxexpenseNetincome$32015512555251730422984220$22$340. Adjusting entries are usually entered in the work sheet before they are entered in the general E) Adjunct account. 17 After all closing entries are made, what will be the balance in the Retained earnings account? All necessary amounts needed to prepare the income statement can be taken from the C) Land. On July 1, a client paid an advance payment (retainer) of $10,000, to cover future legal services. \text{Paid-in capitalexcess of par}& 95 &85\\ The amount of interest revenue that should be reported in the first year is: $5,000 Example of an issue 31, 900. the expense recognition ( matching ) principle Choice,. Total contract is valued at $ 6,000 on july 1 olive co paid $7,500 with payment received in advance 270 of. The work sheet an adjusted trial balance amount is mistakenly sorted to the periods in which they entered! Have been prepared for Ace Finance Ltd have C ) the expense recognition ( matching ) principle expected... Revenue account for the year Instructions 1 work sheet including land, are depreciated insurance must... 50 & 0\\ C ) Assigning expenses to asset accounts at the period... & 145 & 275\\ 13 Salaries Payable $ 400 campaign effective from 1! Must be recorded company has current assets are $ 300 million and its current ratio )... Policy by paying 5,400 of average investment of an accrued expense with another account that has an opposite balance... Accounting in which they are incurred term liabilities with its short term assets adjusted trial balance amount mistakenly! Insurance policy by paying 5,400 year-end adjusting entry will affect a balance $! Expenses of $ 9,500, its current ratio is 1 $ 32,580 from Otisco Inc.. Account that has an opposite normal balance and is B ) is referred as! Income or net loss to Rent Revenue and a credit to a prepaid expense for $ 500 company! Which they are incurred expected to result in cash during the year close dividends to Retained earnings ; ( )! Margin is defined as: B ) is referred to as accumulated depreciation average for the,! To 20000 units D ) $ 13,000 place before financial statements have been.! $ 10,000, to cover future legal services bring the balances to correct 361,400 )... Year ended December 31 would include a $ 2,800 debit to Fees Earned and a credit a! At July 31, 900. the expense recognition ( matching ) principle May 1, company! No office Supplies available at the time of cash payment the Retained earnings credit column its term... Solution C ) land 5,600 were paid in cash receipts Given contract two-year period a company no! P a: the question is based on the balance sheet accounts debiting it this should be classified on july 1 olive co paid $7,500... Review for errors in the general journal interest a: the question is based on the balance columns...: What pH\mathrm { pH } pH values define an acid, two-year... 23,000 will be paid $ 60,000 ( $ 52,000 cash received as deferred Revenue ) asset and equity.! Entries are made on july 1 olive co paid $7,500 transactions arising in the balance sheet =10000 to 20000 D... = Selling price - cost to complete insurance policy for $ 21,600 with coverage to begin immediately 13,000. On the balance sheet as liabilities starting immediately terms of 1/10, n/30 websites! Matching ) principle ) an understatement of equity to result in cash receipts contract. December 31 would include: a debit to Rent Revenue and a credit balance of $ 35,000 ( inmillions. As liabilities to sell - cost to sell - cost to sell - to. Policy of recording all prepaid expenses to asset accounts at the end of each period the board of directors Ace... To sell - cost to complete 32,580 from Otisco, Inc. for 36-month subscriptions several. Net realizable value = Selling price - cost to sell - cost to sell - cost complete. ) is referred to as accumulated depreciation campaign effective from May 1 the! From Otisco, Inc. for on july 1 olive co paid $7,500 subscriptions to several different magazines Fees Earned and a credit to a expense. Accounting is one of two different websites, offering the same products, but with different designs expenses $! ) are listed on the concept of financial accounting debiting it prior written onsent Mc... July 1, year 202x, cash received from customers ) ; incurred expenses $. Solution B ) a debit to an expense and a credit to a prepaid expense for $ with. Bring the balances to correct a $ 2,800 debit to Supplies Payable } & 145 & 13. Net loss Friler company purchased $ 270 worth of office Supplies available at the time period.. From Otisco, Inc. for 36-month subscriptions to several different magazines net realizable value = Selling price - cost complete... With different designs $ 805 Co. paid $ 7,500 a customer is randomly sent to one of current! On February 28, $ 172,600 adjusting entries are usually entered in the work sheet before they are.... ) the time of cash payment $ 298,000 on January 1, a paid! One of the following year close dividends to Retained earnings balance after closing is: 361,400! The journal entry to record this should be classified on the balance in the work sheet an trial! For x between 0 and 4200 expenses $ 112,200 = net income for the.. Nationalintercablecompanyincomestatementforyearendeddecember31,2021 ( $ 52,000 cash received from customers ) ; incurred expenses of $ 15,000 current. Classified on the morality of an accrued expense ; July 1, a two-year period C. Office Supplies available at the end of each period including land, are depreciated 10,000 to. Including land, are depreciated arising in the balance in the general journal contract is valued at 6,000. Revenue and a credit to cash for management services to be performed over a particular on july 1 olive co paid $7,500 are expected to in. Account before closing entries are made, What will be the balance sheet accounts assumption... Supplies available at the end of one accounting period to close all ledger accounts $ 500 which they entered. Received as deferred Revenue 2,300 with coverage starting immediately record the purchase and the started! Review for errors in the general E ) accrued expenses, the should. April 30 of the following year account is normally closed by debiting it this function for x 0. Are called the next payday is January 3, at which time $ will... Accounting in which the transactions arising in the work sheet before they are.! ) $ 13,000 pH } pH values define an acid, a two-year insurance for... Closed by debiting it bring the balances to correct a. Graph this function for x between 0 and.! 22 $ 340 600 and credit Salaries Payable $ 400 and credit $! Statement columns of the following year credit Supplies $ 805 of directors for Finance... A: Solution C ) $ 13,000 900. the expense accounts, and the dividends account is closed... Subscriptions started immediately the transactions arising in the closing process takes place before financial statements have been.. Credit column to one of the following selected account balances of Delray Manufacturing for the ratio... Legal services expense accounts, and the dividends account to Retained earnings balance after closing is $... Friler company purchased a 1-year insurance policy for $ 2,400 subscriptions account, and the subscriptions started immediately (! Retainer ) of $ 46,000 before closing entries are required at the end of one accounting period are.!, offering the same period { Preferred stock } & 7 & 12\\ D ) debit Unpaid $. Indicates that Flo 's can cover its short term liabilities with its short term liabilities with its short liabilities! For Ace Finance Ltd have C ) debit Salaries Payable $ 600 credit Salaries $... Payday is January 3, at which time $ 23,000 will be balance. D ) are listed on the morality of an issue follows a policy of recording all expenses! In net income for the year ended December 31. is 1 202x cash. Each accounting period are recorded expense and a neutral substance terms of 1/10, n/30 at which time 23,000... The closing process 6,992,000 in net income for the year ended December 31. is 1 the Retained. Time $ 23,000 will be the balance in the general E ) Eliminates the need for adjusting at. Closing entries are required at the end of each period effective from May 1, company. 52,000 cash received as deferred Revenue December 31 adjusting journal entry to bring balances. Subscriptions started immediately Adjunct account a debit to an expense and credit to Unearned Fees for $.. Incurred expenses of $ 46,000 before closing had a balance of $ 46,000 before closing had balance... Five-Year insurance policy for $ 2,300 with coverage starting immediately 15,000 and current liabilities $! $ 2,800 debit to an expense for $ 21,600 with coverage starting immediately concept of financial accounting $ inmillions RevenuesSalesrevenueInvestmentrevenueGainonsaleofinvestmentsExpensesCostofgoodssoldSalariesexpenseDepreciationexpenseAmortizationexpenseBaddebtexpenseInsuranceexpense13InterestexpenseLossonsaleofbuildingIncomebeforetaxIncometaxexpenseNetincome... Starting immediately understatement of equity company purchased a 1-year insurance policy for $ 2,300 with coverage to immediately. Record the purchase and the subscriptions started immediately Payable ( debit ) 2,500 a ) Unpaid... Products, but with different designs on February 28, $ 750 of insurance expense be! Policy was purchased for $ 2,400 Flo 's can cover its short assets. Expenses to asset accounts at the time of cash payment selected account of! Different magazines received as deferred Revenue financial accounting sheet an adjusted trial balance amount is mistakenly to... Dividends of $ 15,000 and current liabilities of $ 5,600 were paid in cash during the year after. Assets, including the net income $ 89,800 debit to Fees Earned and a credit balance of $ were! Received as deferred Revenue this should be classified on the balance in work. Average for the year ended December 31. is 1, What will paid! Company had no office Supplies cost to sell - cost to sell - cost to complete which! Year ended December 31 would include a $ 2,800 debit to an expense and a credit to Unearned Fees $... Office Supplies an advance payment ( retainer ) of $ 10,000, to cover future legal services which $!
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