FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 2: Review of the Accounting Process

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 1

Essay

Review LaterAdd Note

Review Later

What is the purpose of the closing process?

Correct Answer

verified

The closing process serves a dual purpose: (1) the temporary accounts are reduced to a zero balance, ready to measure activity in the next accounting period, and (2) the balances of these temporary accounts are transferred to retained earnings to reflect the changes that have occurred in that account during the period. Revenue and expense accounts are first transferred to income summary. The net balance in income summary is then transferred to retained earnings.

Question 2

Essay

Review LaterAdd Note

Review Later

Closed the income summary account, assuming there was a net income for the period.

Correct Answer

verified

Show Answer

Question 3

Multiple Choice

Review LaterAdd Note

Permanent accounts would not include:

Collected a note receivable at maturity, including the interest that had already been accrued.

Prepare an income statement for China Tea Company for the year ended December 31, 2009.

Based on the information presented above, prepare the 12/31/09 Balance Sheet for Krafty Foods.

Adjusting journal entries are required to comply with the realization and matching principles.

The income statement summarizes the operating activity of a firm at a particular point in time.

Prepare a classified balance sheet for China Tea Company as of December 31, 2009.

What is an accrued liability?

Carolina Mills purchased $270,000 in supplies this year. The supplies account increased by $10,000 during the year to an ending balance of $66,000. What was supplies expense for Carolina Mills during the year?

Accruals occur when the cash flow precedes either revenue or expense recognition.

You are reviewing O'Brian Co.'s adjusted trial balance for the year ended 12/31/09. You notice several omissions and incorrect items during your review, some of which are noted below. For each one, you are to determine what effect, if any, these items would have on the stated components of O'Brian Co.'s 2009 Income Statement and 12/31/09 Balance Sheet if they are not corrected or updated. Assume, no income taxes. Use the following code for your answers. You need not include any dollar amounts. N = No Effect O = Overstated U = Understated - $\begin{array}{|l|c|c|c|c|}\hline \text { Additional Information } & \begin{array}{c}12 / 31 / 09 \\\text { Assets }\end{array} & \begin{array}{c}12 / 31 / 09 \\\text { Liabilities }\end{array} & \begin{array}{c}12 / 31 / 09 \\\text { Owners' } \\\text { Equity }\end{array} & \begin{array}{c}2009 \\\text { Net } \\\text { Income }\end{array} \\\hline \begin{array}{l}\text { The journal entry for depreciation on } \\\text { equipment for } 2009 \text { was recorded for } \\\$ 48,000 . \text { It should have been } \$ 66,000 .\end{array} & \\\hline\end{array}$

Suppose that Laramie Company's adjusted trial balance ignored the following information. For each item of information, indicate what effects, if any, these omissions would have on the stated components of Laramie Company's 2009 Income Statement and 12/31/09 Balance Sheet. Assume no income taxes. Use the following code for your answers and be sure to include the dollar amounts of the effects: 0 = No Effect + = Overstated = Understated - $\begin{array} { | l | c | c | c | c | } \hline { \text { Additional Information } } & \begin{array} { c } 12 / 31 / 09 \\\text { Assets }\end{array} & \begin{array} { c } 12 / 31 / 09 \\\text { Liabilities }\end{array} & \begin{array} { c } 12 / 31 / 09 \\\text { Owners' Equity }\end{array} & \begin{array} { c } 2009 \\\text { Net Income }\end{array} \\\hline \begin{array} { l } \text { \$4,000 in cash dividends } \\\text { declared and paid in December } \\2009 \text { were unrecorded. }\end{array} & & & & \\\hline\end{array}$

An example of a contra account is:

Describe what is meant by unearned revenues and give two examples.

-Supplies expense

Suppose that Laramie Company's adjusted trial balance ignored the following information. For each item of information, indicate what effects, if any, these omissions would have on the stated components of Laramie Company's 2009 Income Statement and 12/31/09 Balance Sheet. Assume no income taxes. Use the following code for your answers and be sure to include the dollar amounts of the effects: 0 = No Effect + = Overstated = Understated - $\begin{array} { | l | c | c | c | c | } \hline { \text { Additional Information } } & \begin{array} { c } 12 / 31 / 09 \\\text { Assets }\end{array} & \begin{array} { c } 12 / 31 / 09 \\\text { Liabilities }\end{array} & \begin{array} { c } 12 / 31 / 09 \\\text { Owners' Equity }\end{array} & \begin{array} { c } 2009 \\\text { Net Income }\end{array} \\\hline \begin{array} { l } \text { \$10,000 of the paid and recorded } \\\text { rent expense pertains to the year } \\2010 .\end{array} & & & & \\\hline\end{array}$

Accrued the interest earned but not collected on notes receivable.

-Accounts receivable