1. Which of the following identifies the proper order of theaccounting cycle?
A. Analyze, Journalize, Unadjusted Trial Balance
B. Analyze, Post, Unadjusted Trial Balance
C. Journalize, Post, Adjusted Trial Balance
D. Unadjusted Trial Balance, Adjusted Trial Balance, Close
E. Adjusted Trial Balance, Adjustments, Financial Statements
2. Interim financial statements refer to financial reports:
A. That cover less than one year, usually spanning one, three orsix-month periods
B. That are prepared before any adjustments have beenrecorded
C. That show the assets above the liabilities and theliabilities above the equity
D. Where revenues are reported on the income statement when cashis received and expenses are reported when cash is paid
E. Where the adjustment process is used to assign revenues tothe periods in which they are earned and to match expenses withrevenues
3. The accounting principle that requires revenue to be reportedwhen earned is the:
A. Matching principle
B. Revenue recognition principle
C. Time period principle
D. Accrual reporting principle
E. Going-concern principle
4. Adjusting entries:
A. Affect only income statement accounts
B. Affect only balance sheet accounts
C. Affect both income statement and balance sheet accounts
D. Affect only cash flow statement accounts
E. Affect only equity accounts
5. The system of preparing financial statements based onrecognizing revenues when the cash is received and reportingexpenses when the cash is paid is called:
A. Accrual basis accounting
B. Operating cycle accounting
C. Cash basis accounting
D. Revenue recognition accounting
E. Current basis accounting
6. If throughout an accounting period the fees for legalservices paid in advance by clients are recorded in an accountcalled Unearned Legal Fees, the end-of-period adjusting entry torecord the portion of those fees that has been earned is:
A. Debit Cash and credit Legal Fees Earned
B. Debit Cash and credit Unearned Legal Fees
C. Debit Unearned Legal Fees and credit Legal Fees Earned
D. Debit Legal Fees Earned and credit Unearned Legal Fees
E. Debit Unearned Legal Fees and credit Accounts Receivable
7. A company had no office supplies available at the beginningof the year. During the year, the company purchased $250 worth ofoffice supplies. On December 31, $75 worth of office suppliesremained. How much should the company report as office suppliesexpense for the year? A. $75 B. $125 C. $175 D. $250 E. $325 8. OnJanuary 1 a company purchased a five-year insurance policy for$1,800 with coverage starting immediately. If the purchase wasrecorded in the Prepaid Insurance account and the company recordsadjustments only at year-end, the adjusting entry at the end of thefirst year is:
A. Debit Prepaid Insurance, $1,800; credit Cash, $1,800
B. Debit Prepaid Insurance, $1,440; credit Insurance Expense,$1,440
C. Debit Prepaid Insurance, $360; credit Insurance Expense,$360
D. Debit Insurance Expense, $360; credit Prepaid Insurance,$360
E. Debit Insurance Expense, $360; credit Prepaid Insurance,$1,440
9. Unearned revenue is reported on the financial statementsas:
A. A revenue on the balance sheet
B. A liability on the balance sheet
C. An unearned revenue on the income statement
D. An asset on the balance sheet
E. An operating activity on the statement of cash flows
10. Which of the following assets is not depreciated?
A. Store fixtures
B. Computers
C. Land
D. Buildings
E. Vehicles
11. On April 30, 2011, a three-year insurance policy waspurchased for $18,000 with coverage to begin immediately. What isthe amount of insurance expense that would appear on the company'sincome statement for the year ended December 31, 2011? A. $500 B.$4,000 C. $6,000 D. $14,000 E. $18,000 12. Expenses incurred butunpaid that are recorded during the adjusting process with a debitto an expense and a credit to a liability are:
A. Intangible expenses
B. Prepaid expenses
C. Unearned expenses
D. Net expenses
E. Accrued expenses
13 The difference between the cost of an asset and theaccumulated depreciation for that asset is called
A. Depreciation Expense
B. Unearned Depreciation
C. Prepaid Depreciation
D. Depreciation Value
E. Book Value
14. A company purchased a new truck at a cost of $42,000 on July1, 2011. The truck is estimated to have a useful life of 6 yearsand a salvage value of $3,000. How much depreciation expense willbe recorded for the truck for the year ended December 31, 2011?
A. $3,250
B. $3,500
C. $4,000
D. $6,500
E. $7,000
15. A company's Office Supplies account shows a beginningbalance of $600 and an ending balance of $400. If office suppliesexpense for the year is $3,100, what amount of office supplies waspurchased during the period?
A. $2,700
B. $2,900
C. $3,300
D. $3,500
E. $3,700
1. Which of the following identifies the proper order of theaccounting cycle?
A. Analyze, Journalize, Unadjusted Trial Balance
B. Analyze, Post, Unadjusted Trial Balance
C. Journalize, Post, Adjusted Trial Balance
D. Unadjusted Trial Balance, Adjusted Trial Balance, Close
E. Adjusted Trial Balance, Adjustments, Financial Statements
2. Interim financial statements refer to financial reports:
A. That cover less than one year, usually spanning one, three orsix-month periods
B. That are prepared before any adjustments have beenrecorded
C. That show the assets above the liabilities and theliabilities above the equity
D. Where revenues are reported on the income statement when cashis received and expenses are reported when cash is paid
E. Where the adjustment process is used to assign revenues tothe periods in which they are earned and to match expenses withrevenues
3. The accounting principle that requires revenue to be reportedwhen earned is the:
A. Matching principle
B. Revenue recognition principle
C. Time period principle
D. Accrual reporting principle
E. Going-concern principle
4. Adjusting entries:
A. Affect only income statement accounts
B. Affect only balance sheet accounts
C. Affect both income statement and balance sheet accounts
D. Affect only cash flow statement accounts
E. Affect only equity accounts
5. The system of preparing financial statements based onrecognizing revenues when the cash is received and reportingexpenses when the cash is paid is called:
A. Accrual basis accounting
B. Operating cycle accounting
C. Cash basis accounting
D. Revenue recognition accounting
E. Current basis accounting
6. If throughout an accounting period the fees for legalservices paid in advance by clients are recorded in an accountcalled Unearned Legal Fees, the end-of-period adjusting entry torecord the portion of those fees that has been earned is:
A. Debit Cash and credit Legal Fees Earned
B. Debit Cash and credit Unearned Legal Fees
C. Debit Unearned Legal Fees and credit Legal Fees Earned
D. Debit Legal Fees Earned and credit Unearned Legal Fees
E. Debit Unearned Legal Fees and credit Accounts Receivable
7. A company had no office supplies available at the beginningof the year. During the year, the company purchased $250 worth ofoffice supplies. On December 31, $75 worth of office suppliesremained. How much should the company report as office suppliesexpense for the year? A. $75 B. $125 C. $175 D. $250 E. $325 8. OnJanuary 1 a company purchased a five-year insurance policy for$1,800 with coverage starting immediately. If the purchase wasrecorded in the Prepaid Insurance account and the company recordsadjustments only at year-end, the adjusting entry at the end of thefirst year is:
A. Debit Prepaid Insurance, $1,800; credit Cash, $1,800
B. Debit Prepaid Insurance, $1,440; credit Insurance Expense,$1,440
C. Debit Prepaid Insurance, $360; credit Insurance Expense,$360
D. Debit Insurance Expense, $360; credit Prepaid Insurance,$360
E. Debit Insurance Expense, $360; credit Prepaid Insurance,$1,440
9. Unearned revenue is reported on the financial statementsas:
A. A revenue on the balance sheet
B. A liability on the balance sheet
C. An unearned revenue on the income statement
D. An asset on the balance sheet
E. An operating activity on the statement of cash flows
10. Which of the following assets is not depreciated?
A. Store fixtures
B. Computers
C. Land
D. Buildings
E. Vehicles
11. On April 30, 2011, a three-year insurance policy waspurchased for $18,000 with coverage to begin immediately. What isthe amount of insurance expense that would appear on the company'sincome statement for the year ended December 31, 2011? A. $500 B.$4,000 C. $6,000 D. $14,000 E. $18,000 12. Expenses incurred butunpaid that are recorded during the adjusting process with a debitto an expense and a credit to a liability are:
A. Intangible expenses
B. Prepaid expenses
C. Unearned expenses
D. Net expenses
E. Accrued expenses
13 The difference between the cost of an asset and theaccumulated depreciation for that asset is called
A. Depreciation Expense
B. Unearned Depreciation
C. Prepaid Depreciation
D. Depreciation Value
E. Book Value
14. A company purchased a new truck at a cost of $42,000 on July1, 2011. The truck is estimated to have a useful life of 6 yearsand a salvage value of $3,000. How much depreciation expense willbe recorded for the truck for the year ended December 31, 2011?
A. $3,250
B. $3,500
C. $4,000
D. $6,500
E. $7,000
15. A company's Office Supplies account shows a beginningbalance of $600 and an ending balance of $400. If office suppliesexpense for the year is $3,100, what amount of office supplies waspurchased during the period?
A. $2,700
B. $2,900
C. $3,300
D. $3,500
E. $3,700
Related questions
Ferntree Clothing Inc. is a company that makes and sellsclothing to upscale shops across the country. In 2005, the companydecided to add the sale of fabric to the company portfolio, sellingmainly to other clothing manufacturing companies. Ferntree soonrealized that this market was unprofitable with low margins andwith the continued increase in on-line sales ,their fabric divisionwas suffering.
The companyâs current controller vacated the position withoutnotice four months ago and Ferntree has hired you as their newcontroller to make any adjustments necessary and correct any errorsyou may find. The fiscal year end is January 31, 2017 and you willneed to correct errors, make adjustments and draft financialstatements using ASPE in preparation for the annual audit. Thefollowing information has been gathered for you to work with.
The trial balance at January 31, 2017, before any adjustments isprovided on the attached excel worksheet.
Your review through the company files has led you to thefollowing information, which may require adjustments:
1. In October of 2016, the shareholders met and decided to sellthe fabric division. By December 2016, it became apparent that abuyer is unlikely to be found. The only asset of this division isthe inventory, and all attempts have been made to sell this byyear-end. The company is expected to recover the book value of theinventory as it is being carried at its current fair value. Thereare no liabilities relating to this division. (Hint: Regardless ofa buyer, this would be classified as a gain/loss from discontinuedoperations).
2. The company paid a dividend of $25,000 to its shareholders inDecember 2016. This amount was incorrectly recorded as a cost ofgoods sold for the clothing division.
3. Last years accounts payable had been paid: $25,000 for theclothing division and $15,000 for the fabric division. When theywere paid, they had been debited to cost of goods sold for clothingdivision and operating expenses for the fabric division.
4. Upon reviewing the aged accounts receivable, it is apparentthat one account in the amount $5,000 had become uncollectible andwas written off to bad debt expense. In the past, 1% of accountsreceivable had been used to estimate the allowance for doubtfulaccounts, but this year given the past history, they have decidedto increase that amount to 2% of accounts receivable. All accountsreceivable and the allowance account relate to the clothingdivision.(Hint: adjust the bad debt expense and allowance accountfirst before you adjust for the allowance for doubtfulaccounts).
5. In January 2017, some old equipment was sold for proceeds of$250 cash. The original equipment cost $5,000 and had accumulateddepreciation of $4,900. The entry made when depositing the cash wasdebit Cash, credit equipment for $250. The equipment is beingamortized using the straight-line method over 10 years.Depreciation has not been recorded for the current year for theremainder of the equipment in this account.
6. FV-NI investments are long-term investments. The fair valueof the portfolio investments at January 31, 2017 was $35,000.
7. Insurance is paid each November 30th and covers a 12-monthperiod. When the company paid the insurance, it was debited toinsurance expense.
8. The note payable is due in two equal installments of $25,000each, plus interest on January 31, 2018 and 2019. The annualinterest rate is 5% and the note has been outstanding since August1, 2016.
9. Unpaid salaries and wages amounted to $1,500 at January 31,2017 and will be paid in the first payroll of February 2017. Thesehave not been recorded.
10. In reviewing sales, it was determined that the balance inthe unearned revenue account as at January 31, 2017 should be$30,000. The entire amount relates to the clothing division.
11. Ferntree has been making some income tax installments anddebiting these payments to the Income Taxes Payable account. It hasbeen determined that the applicable tax rate is 25%. The adjustingentry needed for taxes has not been recorded yet. (Hint: do thisentry last)
Required: a) Prepare all adjusting and correcting entries basedon the above information.
b) Post these entries journal entries to the trial balance andcomplete other columns of the work in good form
c) Prepare the January 31, 2017 Combined IncomeStatement/Comprehensive Income using the Multi-step incomestatement format, Statement of Financial Position and Statement ofRetained Earnings for Ferntree Clothing Inc. for the fiscal yearended January 31, 2017
| Ferntree Clothing Inc. | January 31, 2017 | ||||||
| Unadjusted Trial Balance | Adjustments | Adjusted Trial Balance | |||||
| Account | Debit | Credit | Debit | Credit | Debit | Credit | |
| Petty Cash | 500 | ||||||
| Cash | 63,250 | ||||||
| Accounts Receivable | 252,000 | ||||||
| Allowance for doubtful accounts | 7,500 | ||||||
| Preapaid Insurance | 5,000 | ||||||
| Inventory- Clothing | 400,000 | ||||||
| Inventory- Fabric | 150,000 | ||||||
| FV-NI Investments | 30,000 | ||||||
| Equipment | 499,750 | ||||||
| Accum. Depreciation- Equipment | 200,000 | ||||||
| Goodwill | 25,000 | ||||||
| Accounts Payable | 75,000 | ||||||
| Salaries & wages Payable | 0 | ||||||
| Interest payable | 0 | ||||||
| Notes Payable | 50,000 | ||||||
| Unearned Revenue | 20,000 | ||||||
| Income tax payable | 60,000 | ||||||
| Common shares | 75,000 | ||||||
| Retained Earnings | 588,000 | ||||||
| Dividends | 0 | ||||||
| Sales Revenue- Clothing | 2,000,000 | ||||||
| Sales Revenue- Fabric | 250,000 | ||||||
| Unrealized Gain/loss- FV-NI | 0 | ||||||
| Gain/loss on disposal of equipment | 0 | ||||||
| Cost of Goods sold- Clothing | 1,200,000 | ||||||
| Cost of Goods sold- Fabric | 275,000 | ||||||
| Operating expenses-Fabric | 100,000 | ||||||
| Operating Expenses-Clothing: | |||||||
| Depreciation expense | 0 | ||||||
| Office expense | 12,000 | ||||||
| Travel expense | 4,800 | ||||||
| Insurace expense | 7,200 | ||||||
| Interest expense | 1,200 | ||||||
| Utilities expense | 2,600 | ||||||
| Rent expense | 41,000 | ||||||
| Salaries & wages expense | 125,000 | ||||||
| Supplies expense | 500 | ||||||
| Bad debt expense | 5,000 | ||||||
| Telephone & internet expense | 4,200 | ||||||
| Repairs & maintenance expense | 1,500 | ||||||
| Income tax expense | 0 | ||||||
| 3,265,500 | 3,265,500 | 0 | 0 | 0 | 0 | ||
Question 16
Corresponds to CLO 3(d) Hemmingway Corporation paid salaries of$5,000 and advertising expense of $2,000. Which of the followingjournal entries correctly records these expenses?
Debit: Cash $7,000 | ||
Debit: Salaries/Wages Expense$5,000 | ||
Debit: Salaries/Wages Expense$5,000 | ||
Debit: Salaries/Wages Expense$5,000 |
3 points
Question 17
Corresponds to CLO 4(a) Which of the following statements iscorrect regarding accrued revenues and unearned revenues, beforeadjusting entries have been made?
Accrued revenues have not been earned and unearned revenues havebeen earned. | ||
Accrued revenues have been paid and unearned revenues havenot. | ||
Accrued revenues have not been recorded and unearned revenueshave been recorded. | ||
Accrued revenues have been recorded and unearned revenues havebeen recorded. |
3 points
Question 18
Corresponds to CLO 4(b) Hudson Law Corporation received $5,500cash for legal services to be rendered in the future. The fullamount was credited to the liability account Unearned ServiceRevenue. At the end of the period, Hudson determines that $3,000 ofthe legal services have been rendered. The appropriate adjustingjournal entry to be made at the end of the period is:
debit Unearned Service Revenue, $3,000; credit Cash, $3,000. | ||
debit Unearned Service Revenue, $3,000; credit Service Revenue,$3,000. | ||
debit Unearned Service Revenue, $2,500; credit Service Revenue,$2,500. | ||
debit Service Revenue, $2,500; credit Unearned Service Revenue,$2,500. |
3 points
Question 19
Corresponds to CLO 4(c) Ace Corporation purchased officesupplies costing $13,000 and debited Office Supplies for the fullamount. At the end of the accounting period, a physical count ofoffice supplies revealed $2,700 still on hand. The appropriateadjusting journal entry to be made at the end of the period is:
debit Office Supplies Expense, $10,300; credit Office Supplies,$10,300. | ||
debit Office Supplies, $10,300; credit Office Supplies Expense,$10,300. | ||
debit Office Supplies Expense, $2,700; credit Office Supplies,$2,700. | ||
debit Office Supplies, $2,700; credit Office Supplies Expense,$2,700. |
3 points
Question 20
Corresponds to CLO 4(d) On September 1, Northgate paid $18,000to Evans Management Company for 12 months of rent beginning onSeptember 1. The appropriate journal entry was made to record thistransaction. If financial statements are prepared for the 9 monthsended September 30, the adjusting entry to be made by Northgateis:
debit Rent Expense, $13,500; credit Prepaid Rent, $13,500. | ||
debit Prepaid Rent, $1,500; credit Rent Revenue, $1,500. | ||
debit Prepaid Rent, $1,500; credit Rent Expense, $1,500. | ||
debit Rent Expense, $1,500; credit Prepaid Rent, $1,500. |
3 points
Question 21
Corresponds to CLO 5(a) Lennox Corporation purchased a newdelivery truck for 35,000. The sales taxes are $2,700. The logo ispainted on the side of the truck for $800. The truck's annuallicense is $200. Annual insurance on the truck is $1,300. Whatshould Lennox record as the cost of the new truck?
$40,000 | ||
$38,500 | ||
$37,700 | ||
$35,000 |
3 points
Question 22
Corresponds to CLO 5(b) On April 1, 2013, Ballard Corporationpurchased equipment for $65,000. It is estimated that the equipmentwill have a $5,000 salvage value at the end of its 5 year usefullife. If Ballard uses the straight-line method of depreciation,what is the accumulated depreciation at December 31, 2013?
$13,000 | ||
$12,000 | ||
$9,750 | ||
$9,000 |
3 points
Question 23
Corresponds to CLO 5(c) Tyree Company purchased equipment with acost of $90,000 and an estimated salvage value of $18,000. Theequipment is expected to produce 150,000 units over its estimateduseful life of 10 years. If Tyree uses the units-of-activitymethod, what is the depreciation cost per unit to be used incalculating depreciation?
$1.67 | ||
$0.48 | ||
$2.08 | ||
$0.60 |
3 points
Question 24
Corresponds to CLO 5(d) Kerns Company purchased equipment with acost of $200,000 and an estimated salvage value of $10,000. Theequipment has an estimated useful life of 10 years. If Kerns usesthe double-declining balance method, what is the annualdepreciation rate to be used in calculating depreciation?
5% | ||
10% | ||
20% | ||
40% |
3 points
Question 25
Corresponds to CLO 6(a) Marshall Machinery made a sale for$150,000 on March 31. The customer is sent a statement on April 6and payment is received on April 15. Marshall prepares March'smonthly internal financial statements on April 20. Marshall followsGAAP and applies the revenue recognition principle. When is the$150,000 considered to be earned?
March 31 | ||
April 6 | ||
April 15 | ||
April 20 |
