Accounting Chapter 3

The following information is available from the adjusted trial balance of the Harris Vacation Rental Agency. After closing entries are posted, what will be the balance in the Retained earnings account? Total revenues $125,000 Total expenses 60,000 Retained earnings 80,000 Dividends 15,000

$130,000.

On April 1, a company paid the $1,350 premium on a three-year insurance policy with benefits beginning on that date. What amount of the insurance expense will be reported on the annual income statement for the first year ended December 31?

$337.50.

A company purchased a new delivery van at a cost of $60,000 on July 1. The delivery van is estimated to have a useful life of 6 years and a salvage value of $4800. The company uses the straight-line method of depreciation. How much depreciation expense will be recorded for the van during the first year ended December 31?

$4600.

On April 1, Garcia Publishing Company received $1,548 from Otisco, Inc. for 36-month subscriptions to several different magazines. The subscriptions started immediately. What is the amount of revenue that should be recorded by Garcia Publishing Company for the second year of the subscription assuming the company uses a calendar-year reporting period?

$516.

The following information is available for Brendon Company before closing the accounts. What will be the amount in the Income Summary account that should be closed to Retained earnings? Retained earnings $129,000 ​Dividends 41,000 ​Fees earned 215,000 ​Depreciation Expense—Equipment 13,975​ Wages expense 81,700 ​Interest expense 3900​ Insurance expense 13,500​ Rent expense 27,950​

$73,975.

A company earned $3,000 in net income for October. Its net sales for October were $10,000. Its profit margin is:

30%.

A company pays its employees $4,000 each Friday, which amounts to $800 per day for the five-day workweek that begins on Monday. If the monthly accounting period ends on Thursday and the employees worked through Thursday, the amount of salaries earned but unpaid at the end of the accounting period is:

3200

A company had $6,992,000 in net income for the year. Its net sales were $15,200,000 for the same period. Calculate its profit margin.

46.0%.

On May 1, Sellers Marketing Company received $1,500 from Franco Marcelli for a marketing campaign effective from May 1 of the current year to April 30 of the following year. The Cash receipt was recorded as unearned fees and at year-end on December 31, $1,000 of the fees had been earned. Assuming adjustments are only made at year-end, the adjusting entry on December 31 would be:

A debit to Unearned Fees and a credit to Fees Earned for $1,000.

On July 1 Olive Co. paid $7,500 cash for management services to be performed over a two-year period. Olive follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. On July 1 Olive should record:

A debit to a prepaid expense and a credit to Cash for $7,500.

Unearned revenue is reported in the financial statements as:

A liability on the balance sheet.

Which of the following does not require an adjusting entry at year-end?

Cash invested by stockholders.

A company paid Jen Rogers, its sole stockholder, a total of $18,000 in dividends during the current year. The entry needed to close the dividends account is:

Credit Dividends and Debit retained earnings for $18,000

On December 31, Carmack Company's Prepaid Insurance account had a balance before adjustment of $6,000. The insurance was purchased on July 1 of the same year for one year of insurance coverage, with coverage beginning on that date. The adjusting entry needed on December 31 is:

Debit Insurance Expense $3,000; credit Prepaid Insurance $3,000.

What is the proper adjusting entry at December 31, the end of the accounting period, if the balance in the prepaid insurance account is $7,750 before adjustment, and the unexpired amount per analysis of policies is $3,250?

Debit Insurance Expense, $4,500; credit Prepaid Insurance, $4,500.

After preparing and posting the closing entries for revenues and expenses, the income summary account has a debit balance of $33,000. The entry to close the income summary account will be:

Debit Retained earnings $33,000; credit Income Summary $33,000.

The Retained earnings account has a credit balance of $47,000 before closing entries are made. Total revenues for the period are $65,200, total expenses are $44,800, and dividends are $13,000. What is the correct closing entry for the revenue accounts?

Debit Revenue accounts $65,200; credit Income Summary $65,200.

Chase Company has 10 employees, who earn a total of $1,800 in salaries each working day. They are paid on Monday for the five-day workweek ending on the previous Friday. Assume that year ended on December 31, which is a Wednesday, and all employees will be paid salaries for five full days on the following Monday. The adjusting entry needed on December 31 is:

Debit Salaries Expense, $5,400; credit Salaries Payable, $5,400.

An adjusting entry was made on year-end December 31 to accrue salary expense of $1,200. Assuming the company does not prepare reversing entries, which of the following entries would be prepared to record the $3,000 payment of salaries in January of the following year?

Debit Salaries Payable 1,200 Debit Salaries Expense 1, 800 Credit Cash 3,000

If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees, the end-of-period adjusting entry to record the portion of those fees that has been earned is:

Debit Unearned Legal Fees and credit Legal Fees Earned.

Does Land depreciate? (T/F)

False

Is prepaid rent a temporary account?(T/F)

False

Non-current items are those expected to come due within one year or the company's operating cycle. (T/F)

False

Profit margin is not a useful measure of a company's operating results.(T/F)

False

The adjusting entry for prepaid expenses increases expenses and decreases liabilities.(T/F)

False

The total amount of depreciation recorded against an asset over the entire time the asset has been owned:

Is referred to as accumulated depreciation.

The 12-month period that ends when a company's sales activities are at their lowest level is called the:

Natural business year

A balance sheet that places the assets above the liabilities and equity is called a(n):

Report form balance sheet.

What will often result temporarily in abnormal account balances in some accounts.

Reversing Entries

Is profit margin a useful measure of a company's operating results?

True

The adjusting entry for unearned revenues increases assets and increases revenues. (T/F)

True

On December 1, Orenthal Marketing Company received $3,600 from a customer for a 2-month marketing plan to be completed January 31 of the following year. The cash receipt was recorded as unearned fees. The adjusting entry for the year ended December 31 would include:

a debit to Unearned Fees for $1,800.

It is obvious that an error occurred in the preparation and/or posting of closing entries if:

all balance sheet accounts have zero balances.

On December 1, Milton Company borrowed $490,000, at 9% annual interest, from the Tennessee National Bank. Interest is paid when the loan matures one year from the issue date. What is the adjusting entry for accruing interest that Milton would need to make on December 31, the calendar year-end?

debit Interest Expense, $3675; credit Interest Payable, $3675.