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Exam 4: Adjustments,financial Statements,and the Quality of Earnings

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Question 1

Multiple Choice

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Which of the following correctly describes the closing entry process?

A) The closing process reduces the balances in the permanent accounts to zero at the end of each period.
B) The closing entries are usually prepared prior to the adjusted trial balance.
C) The closing process creates a zero balance in all temporary accounts at the end of each period.
D) The closing process creates a zero balance at the end of each period for all accounts on the year-end trial balance.

E) C) and D)
F) None of the above

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Question 2

Multiple Choice

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Which of the following does not correctly describe an adjusting journal entry that debits depreciation expense and credits accumulated depreciation?

A) The entry increases expenses and increases assets.
B) The entry decreases net income and decreases assets.
C) The entry increases expenses and decreases retained earnings.
D) The entry decreases assets and decreases net income.

E) B) and D)
F) None of the above

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Question 3

Multiple Choice

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Which of the following statements regarding earnings per share is not correct?

Which of the following journal entries is created to adjust for a previously recorded deferral?

Which of the following accounts is used to record an accrual for expenses?

Which of the following account balances would not be affected by closing entries?

On November 1,2019,Bruce Company leased some of its office space to Fairlane Company and immediately collected $600,000 for twelve months rent in advance.Bruce debited cash and credited unearned rent revenue for $600,000. Prepare the December 31,2019 adjusting entry Bruce should make in respect to the rent,assuming no adjusting entries have been made during the year.

Which of the following does not correctly describe an adjusting journal entry that debits rent expense and credits prepaid rent?

Which of the following account balances would not be closed at year-end by debiting the account?

At the end of the accounting period,the balances in the nominal accounts are closed while the balances in the real accounts are carried forward to the next accounting period.

Bridge Company keeps a small inventory of supplies used for cleaning and maintenance purposes.On January 1,2019,the inventory of supplies on hand was $2,000.During the year,supplies purchased were debited to the supplies account in the amount of $6,500.On December 31,2019,the amount of supplies in the storeroom was $1,750.The books are adjusted only at year-end. Prepare the adjusting entry required at December 31,2019.

Modern Mother Magazine (MMM)has received cash subscriptions on April 1,2019 in the amount of $3,600,000 for the next three years.The year-end for MMM is December 31,2019.Magazine delivery occurs monthly and started on April 1,2019.These were the only subscription sales for the year. Answer the following questions for the year ended December 31,2019. A.What amount of cash should be reported for the year on the statement of cash flows? B.What amount of subscriptions revenue should be reported on the income statement? C.What amount would be reported as unearned subscriptions revenue on the balance sheet as of December 31,2019?

Which one of the following accounts would not be closed at the end of the accounting year?

Under accrual accounting,interest expense would be recognized on the income statement when the interest has accrued with the passage of time even though cash has not been paid.

Cash collected from customers in advance of providing the goods or services creates a liability,which is later reduced when the goods or services are provided.

What is the effect on the financial statements when a company fails to record depreciation expense at year-end?

Which is the correct sequence of the following steps in the accounting cycle?

Which of the following statements regarding the balance sheet is false?

Which of the following statements is inaccurate with respect to the total asset turnover ratio?

Which of the following correctly describes the following adjusting journal entry?