ACC 212 Lecture Notes - Lecture 5: Accounting Equation, Trial Balance, Deferral
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Question 23
If a resource has been consumed but a bill hasnot been received at the end of the accountingperiod, then
an expense should be recorded when the bill is received. | ||
an expense should be recorded when the cash is paid out. | ||
an adjusting entry should be made recognizing the expense. | ||
it is optional whether to record the expense before the bill isreceived. |
3 points
Question 24
Prepaid expenses are
paid and recorded in an asset account before they are used orconsumed. | ||
paid and recorded in an asset account after they are used orconsumed. | ||
incurred but not yet paid or recorded. | ||
incurred and already paid or recorded. |
3 points
Question 25
If a business has received cash in advance of services performedand credits a liability account, the adjusting entry needed afterthe services are performed will be
debit Unearned Service Revenue and credit Cash. | ||
debit Unearned Service Revenue and credit Service Revenue. | ||
debit Unearned Service Revenue and credit Prepaid Expense. | ||
debit Unearned Service Revenue and credit AccountsReceivable. |
3 points
Question 26
The preparation of adjusting entries is
straight forward because the accounts that need adjustment willbe out of balance. | ||
often an involved process requiring the skills of aprofessional. | ||
only required for accounts that do not have a normalbalance. | ||
optional when financial statements are prepared. |
3 points
Question 27
On January 1 of the current year, Doolittle Company purchasedfurniture for $7,560. The company expects to use the furniture for3 years. The asset has no salvage value. The book value of thefurniture at December 31of this year is
$0. | ||
$2,520. | ||
$5,040. | ||
$7,560. |
3 points
Question 28
Husker Du Supplies Inc. purchased a 12-month insurance policy onMarch 1 of the current year for $1,800. At March 31, the adjustingjournal entry to record expiration of this asset will include a
debit to Prepaid Insurance and a credit to Cash for $1,800. | ||
debit to Prepaid Insurance and a credit to Insurance Expense for$200. | ||
debit to Insurance Expense and a credit to Prepaid Insurance for$150. | ||
debit to Insurance Expense and a credit to Cash for $150. |
The following balances were extracted from the accounting records of Chips Inc. as of December 31, 2016. Prepare the balance sheet and income statement after taking the adjustments listed below A-I into consideration.
100,000 Ordinary Shares | 100,000 |
10 % Preference Shares | 50,000 |
12 % Debenture (Long Term Debt) | 50,000 |
Premises | 130,000 |
Motor Vehicles (Gross Cost 48,000) | 36,000 |
Purchases | 219,700 |
Administration Expenses | 73,200 |
Distribution Costs | 102,600 |
Sales | 476,900 |
Trade Receivables | 39,250 |
Trade Payables | 23,600 |
Inventory at January 1 2016 | 21,250 |
Bank Balance (Asset) | 70,420 |
Investments (At Cost) | 45,800 |
Reserves | 48,220 |
Debenture Interest | 3,000 |
Preference Dividend | 2,500 |
Ordinary Dividend | 5,000 |
Prepare the balance sheet and income statement after taking the following adjustments into consideration.
(A) The closing inventory December 31 2016 was valued at 19,300.
(B) Preference and ordinary dividends were paid halfway through the year, as well as debenture interest, but an accrual should be made for the balance of the debenture interested for year. The company proposes a final dividend of 8,000 of ordinary shares.
(C) The audit fee has been agreed at 5,000.
(D) Insurance (included in administrative expenses) has been paid in advance and 950 relates to 2017.
(E) Accrued expenses of 480 for telephone services (included in administration expenses) and 620 for light and heat (included in distribution costs) have not yet been taken into account.
(F) The trade receivables balance includes 1200 of bad debts, which should be written off.
(G) Depreciation of 25 percent on a straight-line basis should be charged on the motor vehicles (which are vans used in distribution activities).
(H) The market value (fair value) of the investments at December 31 2016 amounts to 44,100.
(I) It is estimated that the income tax charge for 2016 will be 20,000.