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Exam 3: The Accounting Cycle: End of the Period

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Question 31

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On April 1,a $4,800 premium on a one-year insurance policy on equipment was paid and charged to Prepaid Insurance.At the end of the year,the financial statements would report:

A) Insurance Expense,$4,800;Prepaid Insurance $0.
B) Insurance Expense,$3,600;Prepaid Insurance $1,200.
C) Insurance Expense,$3,650;Prepaid Insurance $4,800.
D) Insurance Expense,$1,200;Prepaid Insurance $3,600.

E) A) and B)
F) A) and C)

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Question 32

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When a company makes an end-of-period adjusting entry that includes a credit to Prepaid Rent,the debit is usually made to:

A) Cash.
B) Rent Expense.
C) Rent Payable.
D) Rent Receivable.

E) A) and D)
F) C) and D)

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Question 33

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What are the purposes of closing entries?

The adjusting entry for an accrued expense has the effects of decreasing net income and decreasing liabilities.

The ending Retained Earnings balance of Juan's Mexican Restaurant chain increased by $3.2 million from the beginning of the year.The company declared a dividend of $1.3 million during the year.What was the net income earned during the year?

The matching principle is the principle that states:

Because adjusting entries allow the proper application of the revenue recognition principle or the matching principle,they are a necessary part of cash-basis accounting.

A company receives $2,500 cash from customers for services to be provided next month.Record the cash receipt using (a)accrual-basis accounting and (b)cash-basis accounting.

Adjusting entries:

Long-term assets are assets that provide a benefit to a company for more than one year.

Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms.Match each phrase with the correct term by placing the letter designating the term in the space provided. -____ Represent outflows of resources incurred to generate revenues.

Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms.Match each phrase with the correct term by placing the letter designating the term in the space provided. -____ Financial statement that provides a measure of net income.

Suppose a customer rents a vehicle for four months from Rent-A-Car on October 1,paying $4,000 ($1,000/month).Record Rent-A-Car's adjusting entry on December 31.

The following table contains financial information for Trumpeter Inc.before closing entries: What is Trumpeter's net income?

For the first three years of operations,the company reports net income of $1,000,$2,000,and $3,000,and pays dividends of $500,$1,000,and $1,000.What is the balance of retained earnings at the end of the third year?

A company reports the following amounts: Assets = $6,000;Liabilities = $2,000;Stockholders' equity = $4,000;Dividends = $500;Revenues = $5,000;and Expenses = $3,000.What amount is reported for net income?

Eve's Apples opened for business on January 1,2015,and paid for two insurance policies effective that date.The liability policy was $36,000 for eighteen-months,and the crop damage policy was $12,000 for a two-year term.What was the balance in Eve's Prepaid Insurance account as of December 31,2015?

Consider the following items: Land Accounts Receivable Notes Payable (due in three years) Accounts Payable Retained Earnings Prepaid Rent Unearned Revenue Buildings Notes Payable (due in six months) Equipment How many of the items listed above are generally long-term assets?

A list of all accounts and their balances after updating account balances for adjusting entries is referred to as:

Accrued revenues involve the receipt of cash after the revenue has been earned and an asset has been recorded.