Interactive Presentation Chapter 3

Place the steps in the three-step adjusting process in the correct order:

step 1 - determine what the current account balance equals step 2- determine what the current account balance should equal step 3 - record an adjusting entry to get from step 1 to step 2

Aurora Corporation operated without insurance coverage for the first month of operations. Then, on February 1, the company paid the $4800 premium on a two-year insurance policy with benefits beginning on that date. The company uses the accrual basis. How much insurance expense will be reported on the company's income statement for their first year ended December 31?

$2,200

The company's unclassified balance sheet reported the assets listed in the above table. The total current assets that would be reported on a classified balance sheet prepared for the company are:

$30,750

Aurora Corporation operated without insurance coverage for the first month of operations. Then, on February 1, the company paid the $4800 premium on a two-year insurance policy with benefits beginning on that date. The company uses the cash basis. How much insurance expense will be reported on the company's income statement for their first year ended December 31?

$4,800

The primary difference between the accrual basis and cash basis of accounting is:

-The accrual basis records revenues when services or products are delivered and records expenses when incurred -The cash basis records revenues when cash received and records expenses when cash is paid

Assume that an adjusting entry was made on November 30 for earned, but unpaid employee salaries of $260 which represented 2 days of salaries earned for November 29-30.On December 5, the employees are paid for five days. Record the journal entry on December 5 assuming that reversing entries ARE used by selecting the account names from the pull-down menus and entering dollar amounts in the debit and credit columns.

12/05: Salaries expense - 650 (deb) Cash - 650 (cred)

Assume that an adjusting entry was made on November 30, 2021 for earned, but unpaid employee salaries of $260 which represented 2 days of salaries earned for November 29-30. On December 5, the employees are paid for five days. Record the journal entry on December 5 assuming that reversing entries ARE NOT used by selecting the account names from the pull-down menus and entering dollar amounts in the debit and credit columns.

12/05: Salaries payable - 260 (deb) Salaries expense - 390 (deb) Cash - 650 (cred)

Carlin Company has current assets of $100,000, total assets of $1,000,000, current liabilities of $50,000, total liabilities of $250,000 and total equity of $750,000. What is the current ratio (rounded to the nearest decimal point)?

2.0

Roselawn Company reported net sales of $90,000 and net income of $18,000 for the previous year ended December 31. The company reported net sales of $100,000 and net income of $20,000 for the current year ended December 31. Total assets amounted to $200,000 at December 31 of the previous year and $246,000 at December 31 of the current year. The company's profit margin for the current year ended December 31 (rounded to the nearest decimal point) is:

20.0%

classify the following list of accounts into the correct account type by using the drop-down list

Accounts Receivable: Asset Unearned Revenue: Liability Accounts Payable: Liability

Classify the following accounts into the correct financial statement using the drop-down list.

Consulting Revenue: Income statement Rent Expense: Income statement Dividends: Statement of retained earnings

The retained earnings adjusted balance is entered in:

Balance sheet credit column.

Prepaid expenses reflect transactions when cash is paid:

Before the related expense is recognized

An unclassified balance sheet:

Broadly groups assets, liabilities and equity

Identify the accounts that would appear on the post-closing trial balance.

Cash: Included Dividends: Not included Depreciation Expense: Not included Retained Earnings: Included Income Summary: Not included

On January 1, the company purchased equipment that cost $10,000. The equipment is expected to be worth about (or has a salvage value of)$1,000 at the end of its useful life in five years. The company uses straight-line depreciation. It has not recorded any adjustments relating to this equipment during the current year. Complete the necessary December 31 journal entry by selecting the account names from the pull-down menus and entering dollar amounts in the debit and credit columns.

Dec 31: Depreciation expense -$1,800 (debit) Accumulated depreciation- $1,800 (credit)

On December 1, the company paid $12,000 for 12 months of insurance coverage beginning on that date. The payment was recorded with a debit in that amount to the Insurance Expense account. Complete the necessary December 31 adjusting entry by selecting the account names from the pull-down menus and entering dollar amounts in the debit and credit columns.

December 31: Prepaid insurance - 11,000 (deb) Insurance expense - 11,000 (cred)

On November 1, the company rented space to another tenant. A check in the amount of $9,000, representing three months' rent in advance, was received from the tenant on that date. The payment was recorded with a credit to the Rent Revenue account. Complete the necessary December 31 adjusting entry by selecting the account names from the pull-down menus and entering dollar amounts in the debit and credit columns.

December 31: Rent revenue - 3,000 (deb) Unearned rent revenue - 3,000 (cred)

The company's adjusted trial balance includes the following accounts balances: Cash, $15,000; Equipment, $85,000; Accumulated Depreciation, $25,000; Accounts Payable, $10,000; Retained earnings, $59,000; Dividends, $2,000; Fees Revenue, $56,000; Depreciation Expense, $25,000; and Salaries Expense, $23,000. All accounts have normal balances. Prepare the third closing entry by selecting the account names from the pull-down menus and entering dollar amounts in the debit and credit columns.

December 31: income summary - 8,000 (deb) retained earnings - 8,000 (cred)

The company's adjusted trial balance includes the following accounts balances: Cash, $15,000; Equipment, $85,000; Accumulated Depreciation, $25,000; Accounts Payable, $10,000; Retained earnings, $59,000; Dividends, $2,000; Fees Revenue, $56,000; Depreciation Expense, $25,000; and Salaries Expense, $23,000. All accounts have normal balances. Prepare the first closing entry by selecting the account names from the pull-down menus and entering dollar amounts in the debit and credit columns.

December 31: fees revenue - 56,000 (debit) income summary - 56,000 (credit)

The difference between the Debit and the Credit columns in the Income Statement section of the work sheet equals:

Net income (or net loss).

Adjusting entries affect:

One or more balance sheet accounts and one or more income statement accounts

Place the steps in completing a work sheet in the correct order:

Prepare the adjusted trial balance.: Step 3 Enter the adjustments.: Step 2 List the titles of all accounts, account number and their balance.: Step 1

The accounting cycle consists of 10 steps. Identify the order in which the first five steps will be performed by selecting from the drop down items.

Step 1: Analyze transactions Step 2: Journalize Step 3: Post Step 4: Prepare unadjusted trial balance Step 5: Adjust accounts

place steps in order

Step 1: Close the revenue accounts. Step 2: Close the expense accounts. Step 3: Close the income summary account. Step 4: Close the dividends account.

Which of the following statements is true when comparing the results of using reversing entries with not using reversing entries.

The salaries expense and salaries payable accounts will have the same balances whether or not a reversing entry is made

The work sheet:

aids in the preparation of financial statements.

An adjusted trial balance includes which of the following accounts:

all accounts and their balances

Annual reporting periods can cover:

all of the above

Interim financial statements:

cover less than one year, usually spanning one-, three-, or six-month periods.

Assume that the Accumulated Depreciation account has an unadjusted normal balance of $120,000. The company's list of adjusting entries includes one that debits Depreciation Expense and credits the Accumulated Depreciation account for $20,000. The adjusted balance in the Accumulated Depreciation account is a:

credit balance of $140,000

The current ratio is computed as:

current assets divided by current liabilities

If a company's net income increased while its net sales remained constant, the company's profit margin would:

increase

A reversing entry is

optional and used to simplify the company's recordkeeping process

The revenue recognition principle requires that revenue be recorded:

when the goods or services are provided to customers