Which of the following would not be considered an adjusting entry?

1. Debit insurance expense, credit prepaid insurance
2. Debit unearned revenue, credit revenue
3. Debit accounts payable, credit cash
4. Debit accounts receivable, credit service revenue

Which account would not appear in a closing journal entry?

1. Depreciation expense
2. Cost of Goods Sold
3. Rent receivable
4. Dividends
5. Service revenue

Which account is least likely to be debited when revenue is earned?

1. Unearned revenue
2. Cash
3. Accounts Receivable
4. Accounts Payable

On December 15, Year 1, a company receives an order from a customer for services to be performed on December 28, Year 1. Due to a backlog of orders, the company does not the perform the services until January 3, Year 2. The company sends a bill to the customer on January 4, Year 2 and the customer pays for the services on January 10, Year 2. When should revenue be recorded by the company, assuming the accrual method of accounting?

1. Dec. 15, Year 1
2. Dec. 28, Year 1
3. Jan. 3, Year 2
4. Jan. 4, Year 2
5. Jan. 10, Year 2

Which of the following is a requirement for revenue recognition under accrual accounting?

1. The customer has paid for the goods or services
2. The customer has signed a contract ordering goods are services
3. Delivery of the goods or services has been scheduled
4. The price of the goods or services is fixed
5. All of the above requirements

Salaries payable at the end of the period was $500. Salary expense for the period was $1,100 and $1,400 was paid to employees in cash.

What was salaries payable at the beginning of the period?

A company operates five days per week with a daily payroll of $6,000. Employees are paid every Friday. The last day of the accounting period is Thursday, October 31. What is the amount of Wage Expense to be recorded on the next payday, Friday, November 1?

1. $0
2. $30,000
3. $24,000
4. $12,000
5. $6,000

After the closing process is complete, which of the following is false?

1. All accounts with a non-zero balance will be shown on the balance sheet.
2. The net income or net loss and the dividends for the period have been transferred to the retained earnings account
3. All temporary accounts have a zero balance
4. None of the above are false

The following journal entries were recorded by a company during the month of September. What was net income for the month?

Determine Net Income for September

An electronics store had the following transactions in February:

1. Sold $90,000 of goods to customers, receiving $65,000 in cash and the remainder on account. The inventory had an original cost of $36,000.
2. Purchased $16,000 of inventory, paid $12,000 in cash and the rest remained on account.
3. Paid $2,000 for wages that were owed to employees from January.
4. Received a customer order and payment of $9,000 for an audio system to be delivered and installed in March
5. By February 28, accrued wages were $14,000.

What would Net Income (on an accrual basis) for the month of February would be?

A company’s prepaid rent account showing the beginning and ending balances for Year 1 is shown below: The Year 1 income statement reported $8,000 in rent expense. How much cash was paid for rent in Year 1?

1. $7,400
2. $5,600
3. $7,100
4. $8,600
5. None of the above

An advertising agency receives a $10,000 cash deposit from a client on February 15th for an advertising campaign which will begin in March. Which of the following statements is true for the agency (which uses accrual accounting)?

1. A liability will be reported on the balance sheet at the end of February
2. A prepaid asset will be reported on the balance sheet at the end of February
3. Revenue will be recorded and reported on the income statement for February
4. Cash from operations will be reported on the statement of cash flows in March
5. All of the above are true

Unadjusted Trial Balance December 31, Year 1
	Debits	Credits
Cash	33,900
Accounts Receivable	18,700
Supplies	1,800
Prepaid advertising	900
Equipment	15,000
Accounts Payable		1,200
Unearned Service Revenue		3,000
Common stock		24,000
Retained Earnings		11,200
Service Revenue		76,000
Salaries Expense	41,000
Rent expense	3,600
Utilities	500
	115,400	115,400

Additional Information:

1. Of the balance in the unearned service revenue accounts, $400 had not been earned by year end.
2. On 12/1/Y1, the company rented office space for $1,200 per month for three months and paid the entire $3,600 in cash.
3. On December 1, Year 1, the company paid $900 for six months of advertising.
4. A count of supplies on December 31, Year 1 showed $200 of supplies still on hand.
5. The equipment was purchased on Jan. 1, Year 1. The useful life is estimated to be 10 years. Straight-line depreciation is used and no salvage value is expected.
6. As of 12/31/Y1, salaries of $800 had been earned by employees but still not be paid until 1/1/Y2.

A. Record the necessary adjusting journal entries.
B. Determine net income after adjustments.

Unadjusted Trial Balance December 31
	Debits	Credits
Cash	7,100
Accounts Receivable	6,200
Supplies	1,200
Accounts Payable		1,500
Notes Payable		6,000
Unearned Revenue		400
Common Stock		2,600
Retained Earnings		1,900
Dividends	600
Revenues		10,200
Salaries Expense	5,100
Rent expense	2,400
	22,600	22,600

Additional Information:

1. Supplies used during the year totaled $750.
2. Of the balance in the Unearned Revenue account, 60% had been completed.
3. Accrued salaries at December 31 were $900
4. On December 1, the company prepaid $2,400 for 4 months of rent. This transaction was recorded with a debit to Rent Expense
5. The note is a 6-month, 4% loan obtained from the bank on November 1.

Required:

1. Prepare all necessary adjusting entries as of December 31. (There are 5 of them.)
2. Determine Net Income for the year ending December 31.

Columbia, Inc. had the following transaction in February:

1. Columbia sold inventory for $7,200. $3,500 was received in cash and the remainder was on account. The inventory cost was $4,000.
2. Columbia purchased new inventory costing $6,000. $3,000 was paid in cash and the remainder was on account.
3. Columbia paid $1,200 for February wages and an additional $400 for wages incurred in the last week of January. $300 of wages incurred in the last week of February will be paid March 5.
4. Columbia received $1,000 from customers at deposits on orders to be delivered March 9.
5. Columbia collected $800 on accounts receivable.

Columbia should report how much revenue in February?

1. $7,200
2. $5,300
3. $8,000
4. $9,000
5. None of the above

Columbia should report how much expense in February?

1. $11,200
2. $5,900
3. $5,500
4. $5,200
5. None of the above

For each transaction listed, determine the effect on the February financial statements. Indicate + for increase, or – for decrease. Leave the cell blank if there is no effect.

		Balance Sheet			Income Statement
	Transaction	Assets	Liabilities	SHE	Revenue	Expenses	Net Income
1	Paid wages earned in January	—	—
2	Prepaid rent expired	—		—		+	—
3	Performed service which customer had paid for in January		—	+	+		+
4	Collected on credit sales made in Jan.
5	Depreciation on equipment was recorded	—		—		+	—
6	Hired a new manager and signed a contract to pay her $60,000 per year.
7	Dividends were declared an immediately paid	—		—
8	Purchased shares of another company’s stock for cash
9	Performed a service for a customer, collected three fourths in cash and balance on account.	+		+	+		+
10	Purchased a patent, paying cash
11	Incurred expenses, paid four-fifths in cash and put the balance on account	—	+	—		+	—

For each of the following independent situations, determine the effect of ignoring the required 12/31 year-end adjusting entry. Would assets, liabilities, and equity be understated (U) or overstated (O) if the entry is not made? If there would be no effect, leave the cell blank.

	Assets	Liability	Equity
Cash was received on Dec. 1 when a 2-year lease was signed. Rent revenue was credited on that date.		—	+
Interest is incurred but not yet paid on a long-term note payable		—	+
Equipment with a 5-year life has been used 1 year	—		+
One-half of a prepaid insurance policy has expired	+		+

The following accounts reflect the correct Year 1 year-end balances after adjustment but before closing.

Accumulated depreciation	225	Accounts payable	52
Accounts receivable	280	Cash	76
Common stock	100	Cost of goods sold	420
Depreciation expense	60	Dividends	20
Equipment	600	Interest expense	4
Inventory	90	Note payable, due 8/1/Y4	63
Prepaid rent	10	Rent expense	40
Retained earnings, 1/1/Y1	400	Salary expense	125
Sales revenue	855	Unearned revenue	30

1. Determine total assets
2. Determine total liabilities
3. What are retained earnings on the Dec. 31, Year 1 balance sheet?
4. Prepare the correct entry to close the Income Summary accounts.