Final

Topics: Generally Accepted Accounting Principles, Revenue, Income statement Pages: 7 (1246 words) Published: January 21, 2014


4. The left side of an account is always:
a.the debit side.
b.the credit side.
c.the balance of that account.
d.carried forward to the next accounting period.

5. Posting is the process of:
a.preparing a chart of accounts.
b.adding a column of figures.
c.transferring journal entries to ledger accounts.
d.recording entries in a journal.

6. Montana Inc.'s fiscal year ended on December 31, 2012. The balance in the prepaid insurance account as of December 31, 2012, was $34,800 (before adjustment) and consisted of the following policies:

Policy
Date of
Date of
Balance in
Number
Purchase
Expiration
Account
279248
10/1/11
9/30/12
$14,400
694421
3/1/12
2/28/14
9,600
800616
7/1/11
6/30/13
10,800

$34,800
The adjusting entry required on December 31, 2012, would be
a.
Insurance Expense 22,000
Prepaid Insurance 22,000
b.
Insurance Expense 20,200
Prepaid Insurance 20,200
c.
Prepaid Insurance 17,600
Insurance Expense 17,600
d.
Insurance Expense 25,600
Prepaid Insurance 25,600

ANS:D
Policy 279248  3 months expired last year:
all $14,400 expires this year
Policy 694421  10 months expire this year:
$9,600  10/24 = $4,000
Policy 800616  6 months expired last year,

12 months expire this year:
$10,800  12/18 = $7,200.
Adjusting entry:
$14,400 + $4,000 + $7,200 = $25,600.

PTS:1DIF:ChallengingOBJ:4.2
NAT:AACSB Analytic | AICPA FN Measurement

7.Tawdry Company debited Prepaid Insurance for $900 on May 1, 2012, for a one-year fire insurance policy. If the company prepares monthly financial statements, failure to make an adjusting entry on May 31, for the amount of insurance that has expired would cause: a.assets to be overstated by $900 and expenses to be understated by $900. b.expenses to be overstated by $75 and assets to be understated by $75. c.assets to be overstated by $75 and expenses to be understated by $75. d.expenses to be overstated by $900 and assets to be understated by $900.

8.Which one of the following accounts is not closed at the end of an accounting period? a.Retained Earnings account
b.Dividends account
c.Service Revenue account
d.Insurance Expense account

9.The revenue recognition principle dictates that revenue should be recognized in the accounting period in which it is a.collected.
b.earned and realizable
c.earned and collected.
d.most likely to be collected.

10.The transactions carried out by Blue Waters Corporation during the year caused an increase in total assets of $25,650 and a decrease in total liabilities of $12,250. If no additional stock was issued during the year and dividends of $7,850 were paid, what was the net income for the year? a.

$53,600
b.
$45,750
c.
$29,100
d.
$13,400

ANS:B
Owners' equity
= Assets  Liabilities
Owners' equity:
$25,650  ($12,250) = $37,900
Net income:
$37,900 = x  $7,850

x = $45,750

PTS:1DIF:ChallengingOBJ:2.3
NAT:AACSB Analytic | AICPA FN Measurement

Problem A - II — Adjusting Entries (15 points)
The following information for Valance Company is available on June 30, 2012, the end of a monthly accounting period. You are to prepare the necessary adjusting journal entries for the Valance Company for the month of June for each situation given. Appropriate adjusting entries had been recorded in previous months. Show calculations. 1.Valance Company purchased a 2-year insurance policy on April 1, 2012, and debited Prepaid Insurance for $4,100.

2.On April 1, 2012, a tenant in an apartment building owned by the Valance Company paid $4,900, which represents three months' rent in advance. The amount received was credited to the Unearned Rent Revenue account.

3.On June 1, 2012, the balance in the Supplies account was $130. During June,...
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