ACCT 2 EXAM PRACTICE

. Prepaid Rent. On September 1 of the current year, the company prepaid $24,000 for two years of rent for facilities being occupied that day. The company debited Prepaid Rent and credited Cash for $24,000. Step 1: Determine what the current account balance equals. Step 2: Determine what the current account balance should equal. Step 3: Record the December 31 adjusting entry to get from step 1 to step 2.

1. Current account balance equals 24,000 (CREDIT ) 2. Current account balance equals 20,000 (CREDIT) 3. Rent expense 4,000 (D) Prepaid rent 4,000 (C)

Accumulated Depreciation: The company has only one plant asset (equipment) that it purchased at the start of this year. That asset had cost $32,000, had an estimated life of seven years, and is expected to be valued at $4,000 at the end of the seven years. The company uses straight line depreciation method to calculate its depreciation For each separate case below, follow the three-step process for adjusting the Accumulated Depreciation account at December 31. Step 1: Determine what the current account balance equals. Step 2: Determine what the current account balance should equal. Step 3: Record the December 31 adjusting entry to get from step 1 to step 2.

1. current account balance equals 0 2. Current account balance should equal 4000 (Credit) 3. Deprecation expense 4000 (Debit) Accumulated deprecation expense 4000 (credit)

. Accumulated Depreciation: The company has only one plant asset (truck) that it purchased at the start of this year. That asset had cost $44,000, had an estimated life of five years, and is expected to have zero value at the end of the five years. The company uses straight line depreciation method to calculate its depreciation. For each separate case below, follow the three-step process for adjusting the Accumulated Depreciation account at December 31. Step 1: Determine what the current account balance equals. Step 2: Determine what the current account balance should equal. Step 3: Record the December 31 adjusting entry to get from step 1 to step 2.

1. current account balance equals 0 2. current account balance should equal 8,800(CREDIT) 3. Depreciation expense 8,800 (Debit) Accumulated depreciation expense (Credit)

a. Accumulated Depreciation: The Krug Company's Accumulated Depreciation account has a $13,500 balance to start the year. A review of depreciation schedules reveals that $14,600 of depreciation expense must be recorded for the year. For each separate case below, follow the three-step process for adjusting the Accumulated Depreciation account at December 31. Step 1: Determine what the current account balance equals. Step 2: Determine what the current account balance should equal. Step 3: Record the December 31 adjusting entry to get from step 1 to step 2.

1. current account balance equals 13,500 2. current account balance should equal 28,100 3. Depreciation expense 14,600 (D) Accumulated deprecation expense 14,600 (C)

Prepaid Insurance. The Prepaid Insurance account has a $5,890 debit balance at the start of the year. A review of insurance policies shows $1,040 of insurance has expired by year-end. Step 1: Determine what the current account balance equals. Step 2: Determine what the current account balance should equal. Step 3: Record the December 31 adjusting entry to get from step 1 to step 2.

1. current account balance equals 5,890 (DEBIT) 2. current account should equal 4,850 (DEBIT) 3. Insurance expense 1040 (D) prepaid insurance 1040 (C)

.Prepaid Insurance. The Prepaid Insurance account has a $4,700 debit balance to start the year. A review of insurance policies shows that $900 of unexpired insurance remains at year-end. Step 1: Determine what the current account balance equals. Step 2: Determine what the current account balance should equal. Step 3: Record the December 31 adjusting entry to get from step 1 to step 2.

1. current balance equals 4,700 (DEBIT) 2. current account balance equals 900(DEBIT) 3. Insurance expense 3,800(D) prepaid insurance 3,800(C)

In its first year of operations, Roma Company reports the following. Earned revenues of $45,000 ($37,000 cash received from customers). Incurred expenses of $25,500 ($20,250 cash paid toward them). Prepaid $6,750 cash for costs that will not be expensed until next year. Compute Roma's first-year net income under the cash basis and the accrual basis of accounting.

Cash Basis Accrual Basis Revenues 37,000 45,000 Expenses 27,000 25,500 Net Income 10,000 20,000

prepare the required December 31 year-end adjusting entries. Depreciation on the company's wind turbine equipment for the year is $5,000.

General Journal Deprecation expense 5,000(D) Accumulated depreciation- equipment 5,000 (C)

The Prepaid Insurance account for the solar panels had a $2,000 debit balance at December 31 before adjusting for the costs of any expired coverage. Analysis of prepaid insurance shows that $600 of unexpired insurance coverage remains at year-end.

General Journal Insurance Expense 1,400 (D) prepaid insurance 1,400 (C)

As of December 31, the company has earned, but not yet recorded, $400 of interest revenue from investments in socially responsible bonds. The interest revenue is expected to be received on January 12.

General Journal Interest receivable 400 (D) interest revenue 400(C)

As of December 31, $1,200 in wages expense for the organic produce workers has been incurred but not yet paid.

General Journal Wages Expense 1,200 (D) Wages payable 1,200 (C)

The company paid a $4,500 cash dividend to the owner (sole shareholder

General Journal Dividend 4,500 (D) Cash 4,500 (C)

The company paid $39,000 cash for equipment purchased.

General Journal Equipmentpurchased 39,000(D) Cash 39,000(C)

The company paid $1,200 cash for the just-completed two-week salary of the receptionist.

General Journal Salaries expense 1,200 (D) Cash 1,200(C)

The company received $3,000 cash in advance for sustainability consulting work. As of December 31, one-third of the sustainability consulting work had been performed.

General Journal Unearned Revenue 1,000(D) Service Revenue 1,000 (C)

The company paid $800 cash for this month's utilities.

General Journal Utilities expense 800(D) Cash 800 (C)

The company paid $2,000 cash for payment on a 6-month-old account payable for office supplies.

General Journal Debit Credit since cash goes down then it is credit Debit(D)/Credit (C) Account payable 2000(D) Cash 2000(C)

The ledger of Mai Company includes the following accounts with normal balances as of December 31: Retained Earnings $9,000; Dividends $800; Services Revenue $13,000; Wages Expense $8,400; and Rent Expense $1,600. Prepare its December 31 closing entries.

General Journal Debit Credit Retained earnings 800 Dividends 800 Income Summary 9,000 Retained Earnings 9,000 Income Summary 10,000 Wages Expense 8,400 Rent Expense 1,600 Service Revenue 13,000 Income Summary 13,000

Prepare its December 31 closing entries. Wages Expense $8,400; and Rent Expense $1,600.

Income Summary 10,000 Wages Expense 8,400 Rent Expense 1,600

Prepare its December 31 closing entries. Retained Earnings $9,000

Income Summary 9,000 Retained Earnings 9,000

a. The company paid $2,000 cash for payment on a 6-month-old account payable for office supplies. b. The company paid $1,200 cash for the just-completed two-week salary of the receptionist. c. The company paid $39,000 cash for equipment purchased. d. The company paid $800 cash for this month's utilities. e. The company paid a $4,500 cash dividend to the owner (sole shareholder). Listed below are three reasons why a transaction would not result in an expense. Match each of the reasons to the transaction it properly describes.

Reason Transaction : This transaction is a distribution of cash to the owner. Even though equity decreased, that decrease did not occur in the process of providing goods or services to customers.(e) This transaction decreased cash in settlement of a previously existing liability (equity did not change). Supplies expense is recorded when assets are used, not necessarily when cash is paid selected answer correct (a) This transaction involves the purchase of an asset. The form of the company's assets changed, but total assets did not (and neither did equity). (c)

Prepare its December 31 closing entries. Dividends $800

Retained Earnings 800 Dividends 800

Prepare its December 31 closing entries. Services Revenue $13,000

Service Revenue 13,000 Income Summary 13,000

Steps of Accounting cycle

a) 1- Postining journal entries to the ledge 2- Journalizing transactions and events 3 - Analyzing transactions and events 4- Preparing the unadjsuted trail balance 5- Preparining the post-closing trail balance 6- Preparing the adjusted trail balance 7- Preparing the financial statements 8- Journalzing and posting closing entries 9- Journalzing and posting adjsuted entries b)1- Analzyzing transactions and events 2- Journalizing transactions and events 3- Postining journal entries to the ledger 4- Preparing the unadjsuted trail balance 5- Journalzing and posting adjsuted entries 6- Preparing the adjusted trail balance 7- Preparing the financial statements 8- Journalzing and posting closing entries 9- Preparining the post-closing trail balance c) 1- Analyzie transactions and events 2- Journalize transactons and events 3- Posting journalt entires to legder 4 - Prepare the the adjusted trail balance 5- Journalize and posting adjsuted entires 6- Preparing the unajdusted trail balance 7- Prepare the finacial statements 8- Journalzing and posting closing entries 9- Preparing the post clossing trail balance