To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 004: Adjustments, Financial Statements, and the Quality of Earnings True / False Questions The ledger (T-accounts) contains information which has been posted from the journal TRUE AACSB Tag: Relative Thinking Difficulty: Easy L.O.: The trial balance, prepared immediately after all transactions of the period have been recorded and posted, should show all account balances that are in the ledger (T-accounts) TRUE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: Deferred expenses are previously unrecorded expenses that need to be recorded at the end of the accounting period to reflect the amount incurred and its related payable FALSE AACSB Tag: Relative Thinking Difficulty: Easy L.O.: Income taxes incurred but not yet paid at the end of the accounting period is an example of an accrued expense adjusting entry TRUE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 4-1 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 004: Adjustments, Financial Statements, and the Quality of Earnings When an adjustment decreases prepaid insurance and increases insurance expense for the portion expired, that is an example of a prepaid expense adjusting entry TRUE AACSB Tag: Relative Thinking Difficulty: Easy L.O.: Adjusting entries are used to update income statement accounts and balance sheet accounts TRUE AACSB Tag: Relative Thinking Difficulty: Easy L.O.: Unearned rent revenue is an example of a liability account that will usually not be satisfied by payment of cash but rather by allowing the tenant to occupy the premises for which they have prepaid TRUE AACSB Tag: Relative Thinking Difficulty: Hard L.O.: Rent of $4,000 collected in advance was recorded as unearned rent revenue At the end of the accounting period, half the rent was earned The related adjusting entry should be a credit to rent revenue for $2,000 and a debit to unearned rent revenue for $2,000 TRUE AACSB Tag: Analytic Difficulty: Medium L.O.: 4-2 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 004: Adjustments, Financial Statements, and the Quality of Earnings Adjusting entries are recorded in the journal (i.e., journalized) and then they are posted to the ledger (T-accounts) TRUE AACSB Tag: Relative Thinking Difficulty: Easy L.O.: 10 Both the adjusting entries and the closing entries usually are dated as of the last day of the accounting period TRUE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 11 Depreciation expense is an estimated allocation of the cost of long-lived assets and is recorded in a contra asset, accumulated depreciation, because it is only an estimated amount and not known with certainty TRUE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 12 The statement of cash flows is designed to explain the causes of changes in the cash account during the period that resulted from the inflows and outflows of cash TRUE AACSB Tag: Relative Thinking Difficulty: Easy L.O.: 4-3 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 004: Adjustments, Financial Statements, and the Quality of Earnings 13 The earnings per share ratio is disclosed at the bottom of the statement of cash flows FALSE AACSB Tag: Communications Difficulty: Easy L.O.: 14 Net income under accrual accounting is subject to more distortion than cash flow from operations because of large accruals and deferrals that can impact reported income TRUE AACSB Tag: Relative Thinking Difficulty: Hard L.O.: 15 Net profit margin is computed by dividing net sales by net income FALSE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 16 When net profit margin is declining over a five-year period, it could indicate inefficient management of expenses and sales revenue TRUE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 17 When net profit margin is declining over a five-year period, it signals inefficient management of expenses and sales revenue TRUE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 4-4 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 004: Adjustments, Financial Statements, and the Quality of Earnings 18 Those firms that make relatively conservative estimates for their accrued and deferred adjustments are said to have financial reports disclosing a higher quality of earnings TRUE AACSB Tag: Relative Thinking Difficulty: Hard L.O.: 19 Revenue and expense accounts often are called permanent (real) accounts because their balances are closed out at the end of the accounting year FALSE AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 20 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 TRUE AACSB Tag: Relative Thinking Difficulty: Easy L.O.: Multiple Choice Questions 21 Which of the following is a correct statement about the unadjusted trial balance? A It provides a listing of the balance sheet accounts only B It provides data in a convenient form for preparing the adjusting entries and financial statements C It provides a check of the equality of the debits and credits of the ledger accounts after transactions have been journalized and posted D Both B and C are correct AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 4-5 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 004: Adjustments, Financial Statements, and the Quality of Earnings 22 Morgan Company purchased supplies inventory for $2,000 Due to an error in posting, the inventory account was debited for only $200 when accounts payable was credited for $2,000 During which phase of the accounting cycle would this error be discovered? A Recording the transaction in the journal B Preparation of the financial statements C Preparation of the trial balance D Analysis of each transaction AACSB Tag: Relative Thinking Difficulty: Hard L.O.: 23 Which is the correct order of the steps in the accounting cycle during the accounting period? A Transaction analysis, journal entries, trial balance B Transaction analysis, posting to the ledger, journal entries C Transaction analysis, posting to the ledger, adjusting the accounts D Transaction analysis, journal entries, posting to the ledger AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 24 Which is the correct order of the steps in the accounting cycle at the end of the accounting period? A Prepare financial statements, journalize and post adjusting entries, journalize and post the closing entries, and prepare a post-closing trial balance B Prepare an unadjusted trial balance, journalize and post adjusting entries, journalize and post the closing entries, and prepare financial statements C Journalize and post adjusting entries, journalize and post the closing entries, prepare financial statements, and prepare an adjusted trial balance D Prepare an unadjusted trial balance, journalize and post adjusting entries prepare financial statements, and journalize and post the closing entries AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 4-6 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 004: Adjustments, Financial Statements, and the Quality of Earnings 25 The following is an example of an error that will not be discovered on the trial balance: A An entry was journalized and posted as a debit to cash for $500 and credit to accounts receivable for $5,000 B An entry was journalized and posted as a debit to cash for $500 and a credit to sales revenue $500 when payment was received on a customer's account C An entry was journalized and posted as a debit to wages expense for $20,000 and a debit to wages payable for $20,000 D An entry was journalized and posted as a debit to cash for $1,110 and a credit to sales for $1,101 AACSB Tag: Analytic Difficulty: Medium L.O.: 26 On October 1, 2009, Adams Company paid $4,000 for a two-year insurance policy on the building with the insurance starting on that date The accounting period ends December 31 At the end of December 31, 2009, the financial statements should report A Prepaid insurance, $4,000 and Insurance expense, $0 B Prepaid insurance, $0 and Insurance expense, $4,000 C Prepaid insurance, $2,000 and Insurance expense, $2,000 D Prepaid insurance, $3,500 and Insurance expense, $500 AACSB Tag: Analytic Difficulty: Medium L.O.: 27 On April 1, 2007, the premium on a one-year insurance policy on equipment was paid amounting to $3,000 with the insurance starting on that date At the end of December 31, 2007 (end of the accounting period), the financial statements for 2007, would report A Insurance expense, $3,000; Prepaid insurance $0 B Insurance expense, $0; Prepaid insurance $3,000 C Insurance expense, $750; Prepaid insurance $2,250 D Insurance expense, $2,250; Prepaid insurance $750 AACSB Tag: Analytic Difficulty: Medium L.O.: 4-7 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 004: Adjustments, Financial Statements, and the Quality of Earnings 28 On July 1, 2009, Allen Company signed a $100,000, one-year, percent note payable At due date, June 30, 2010, the principal and interest will be paid Interest expense should be reported on the income statement (for the year ended December 31, 2009) as A $6,000 B $3,000 C $1,500 D $1,200 AACSB Tag: Analytic Difficulty: Medium L.O.: 29 On December 31, 2009, the effect of recording an adjusting entry for accrued wages of $2,000 would be A a decrease in stockholders' equity and decrease in an asset B a decrease in liabilities and increase in stockholders' equity C a decrease in stockholders' equity and an increase in liabilities D an increase in stockholders' equity and increase in an asset AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 30 On January 1, 2007, the ledger of Global Corporation correctly showed supplies inventory of $1,000 During 2007, supplies purchases amounted to $5,000 A physical count of inventory on hand at December 31, 2007, showed $1,200 The 2007 income statement should report supplies expense amounting to A $ 6,000 B $ 5,200 C $ 4,800 D $ 1,000 AACSB Tag: Analytic Difficulty: Medium L.O.: 4-8 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 004: Adjustments, Financial Statements, and the Quality of Earnings 31 How is carrying value calculated? A Acquisition cost minus accumulated depreciation B Acquisition cost minus depreciation expense C Acquisition cost divided by the useful life of the asset D None of the other answers is correct AACSB Tag: Analytic Difficulty: Easy L.O.: 32 On December 31, 2007 (end of the accounting period), Dallas Company recorded depreciation on its company truck of $5,000 Transaction analysis of the depreciation should reflect the following A decrease stockholders' equity and increase liabilities B decrease assets and increase liabilities C decrease stockholders' equity and decrease assets D decrease assets and increase stockholders' equity AACSB Tag: Analytic Difficulty: Medium L.O.: 33 On July 1, 2009, Canine Company signed a two-year $50,000 note payable with percent interest At due date, July 1, 2011, the principal and interest will be paid in full Interest expense should be reported on the income statement for the year ended December 31, 2009, in the amount of A $ 2,000 B $ 2,250 C $ 4,000 D $ AACSB Tag: Analytic Difficulty: Hard L.O.: 4-9 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 004: Adjustments, Financial Statements, and the Quality of Earnings 34 On July 1, 2009, Gerdin Company borrowed $100,000 The company signed a note payable with interest at percent per year The note and interest are due on December 31, 2009 On December 31, 2009, Goode paid $103,000 to settle the debt in full Assuming no accruals for interest have been made during the year, transaction analysis of the $103,000 cash payment on December 31, 2009, should reflect the following: A decrease assets, $103,000; decrease liabilities, $103,000 B decrease assets, $100,000; decrease stockholders' equity, $3,000; and decrease liabilities, $103,000 C decrease stockholders' equity, $100,000; decrease liabilities, $3,000; and decrease assets, $103,000 D decrease liabilities, $100,000; decrease stockholders' equity, $3,000; and decrease assets, $103,000 AACSB Tag: Analytic Difficulty: Hard L.O.: 35 On January 1, 2009, Ryan Company paid the premium in advance on a three-year insurance policy on equipment in the amount of $6,000 At that time, the full amount paid was recorded as prepaid insurance On December 31, 2009, the end of the accounting year, Hammond Company would be required to record an adjusting entry that would include a A $6,000 credit to prepaid insurance B $2,000 debit to insurance expense C $2,000 debit to prepaid insurance D $6,000 debit to insurance expense AACSB Tag: Analytic Difficulty: Medium L.O.: 4-10 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 004: Adjustments, Financial Statements, and the Quality of Earnings 98 The comparative balance sheets of Titan Company for the years ended December 31, 2009 and 2010, reported the following selected amounts: A Calculate the total amount of office supplies purchased during 2010 B Calculate the total amount of rent collected during 2010 C In what section of the statement of cash flows would the payments for office supplies appear? D In what section of the statement of cash flows would the collection for rents appear? A $800 $2,000 + $15,000 = $13,800 B $10,500 $11,000 + $12,000 = $11,500 C Operating activities D Operating activities AACSB Tag: Analytic Difficulty: Hard L.O.: 99 On January 1, 2008 the balance in the prepaid insurance account was $2,500 On December 31, 2008, after the 2008 adjusting entries were made, the balance of the prepaid insurance account was $1,200 During 2008, cash payments for insurance premiums amounted to $5,000, which was debited to the prepaid insurance account Give the adjusting entry which must have been made at December 31, 2008 AACSB Tag: Analytic Difficulty: Hard L.O.: 4-48 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 004: Adjustments, Financial Statements, and the Quality of Earnings 100 On December 31, 2009 (the end of the accounting period), the manager of Jordan Creek Apartments noticed that four tenants had not paid their December rent amounting to $500 each (and not yet recorded) What is the adjusting entry required on December 31, 2009.? AACSB Tag: Analytic Difficulty: Medium L.O.: 101 On July 1, 2009, Bass Company paid a two-year insurance premium On that date the following journal entry was made: The annual accounting period ends on December 31 A How much of the premium should be reported as expense on the 2009 income statement? B What is the amount of prepaid insurance which should be reported on the balance sheet at December 31, 2009? C Give the adjusting entry that should be made on December 31, 2009 A $4,800 B $4,800 C 6/24 = 1,200 18/24 = 3,600 AACSB Tag: Analytic Difficulty: Medium L.O.: 4-49 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 004: Adjustments, Financial Statements, and the Quality of Earnings 102 For each of the following transactions, indicate the amounts and direction of effects of the adjusting entry on the elements of the balance sheet and income statement Using the following format, indicate + for increase, and for decrease, and NE for no effect Transactions: A Wages of $5,800 have been earned, but not paid to employees at the end of the year B Supplies in the amount of $2,000 were used during the year that are currently recorded in the office supplies inventory account C The one-year bank loan taken out on October 1, 2008 in the amount of $100,000 has accrued interest that will not be paid until September 30, 2009 along with the principal AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 4-50 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 004: Adjustments, Financial Statements, and the Quality of Earnings 103 Explain how adjusting entries provide for potential manipulation by managers In addition, discuss how compensation arrangements may result in incentives for such manipulation to occur Responses will vary to these questions Managers often receive bonuses based on the strength of a company's financial performance In addition, stock options are often used as a means of compensation The higher the company's market value, the more compensation they earn When actual performance lags behind expectations, managers may be tempted to manipulate accruals and deferrals to make up part or all of the difference Evidence from academic research as well as SEC investigations indicates that some managers engage in such behavior In many of the SEC cases, the firms involved, their managers, and their auditors are penalized for such actions AACSB Tag: Ethics Difficulty: Hard L.O.: 4-51 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 004: Adjustments, Financial Statements, and the Quality of Earnings 104 On September 1, 2009, Fast Track, Inc was started with $30,000 invested by the owners as contributed capital On September 30, 2009, the accounting records contained the following amounts: Prepare an income statement for September for the first month of Fast Track's operation Ignore income taxes AACSB Tag: Analytic Difficulty: Medium L.O.: 4-52 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 004: Adjustments, Financial Statements, and the Quality of Earnings 105 On September 1, 2009, Fast Track, Inc was started with $30,000 invested by the owners as contributed capital On September 30, 2009, the accounting records contained the following amounts: Prepare a statement of stockholders' equity for September, the first month of operation Ignore income taxes AACSB Tag: Analytic Difficulty: Medium L.O.: 4-53 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 004: Adjustments, Financial Statements, and the Quality of Earnings 106 On September 1, 2009, Fast Track, Inc was started with $30,000 invested by the owners as contributed capital On September 30, 2009, the accounting records contained the following amounts: Prepare a balance sheet for Fast Track, Inc as of September 30, 2009 AACSB Tag: Analytic Difficulty: Medium L.O.: 4-54 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 004: Adjustments, Financial Statements, and the Quality of Earnings 107 A Explain how the income statement relates to the statement of stockholders' equity B Explain how the statement of stockholders' equity relates to the balance sheet C Explain how the statement of cash flows relates to the balance sheet A Net income from the income statement appears in the statement of stockholders' equity as an increase to retained earnings B The ending balance for contributed capital and retained earnings appear on the balance sheet in the stockholders' equity section C The bottom line for the ending cash balance on the statement of cash flows is the same as the cash account balance on the balance sheet AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 108 Modern Mother Magazine has received cash subscriptions on April 1, 2009 in the amount of $3,600,000 for the next three years Their year-end is December 31, 2009 Magazine delivery occurs monthly and started on April 1, 2009 These were the only subscription sales for the year Answer the following questions for the year ended December 31, 2009: 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, 2009? a $3,600,000 b $900,000 c $2,700,000 AACSB Tag: Analytic Difficulty: Medium L.O.: 4-55 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 004: Adjustments, Financial Statements, and the Quality of Earnings 109 Key income statement information for ToyShop, Inc., a toy manufacturer follows: (1) Compute net profit margin for each year (2) Discuss some of the events which could have caused the changes to the net profit margin based on the income statement information above (1) In 2008, (3.8%); in 2007, 4.5%; and in 2006, 6.2% (2) From 2006 to 2007 while sales increased 28.1% and cost of goods sold only increased at a lower rate of 24.3% leading to a higher gross profit margin, ToyShop's operating expenses and nonoperating losses increased at 36.8% and 150.9% respectively causing net profit margin to drop from 6.2% to 4.5% From 2007 to 2008, sales dropped by 10.5% while cost of goods sold decreased only 1.4%, which adversely impacted the gross profit margin In addition, operating expenses actually increased 5% and nonoperating losses increased 126.6% leading to a negative net profit margin of (3.8%) ToyShop has been unable to control its operating expenses and reduce nonoperating losses This was compounded in 2008 by the sharp drop in sales of 10.5% while cost of goods sold dropped by only 1.4% There is indication that they had to discount their toys in order to sell inventory in 2008 AACSB Tag: Analytic Difficulty: Hard L.O.: 4-56 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 004: Adjustments, Financial Statements, and the Quality of Earnings 110 The following income statement was reported for Bauer Inc for the first year of operations ending December 31, 2009 reported (in thousands of dollars): A Calculate net profit margin B Calculate earnings per share if there are 200,000 shares of common stock outstanding A 13.5%, (calculated by dividing net income $3,315 by sales revenue $24,500) B $16.58 per share (calculated by taking net income $3,315,000 divided by common shares outstanding 200,000) AACSB Tag: Analytic Difficulty: Medium L.O.: 4-57 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 004: Adjustments, Financial Statements, and the Quality of Earnings 111 The adjusted trial balance of Tahoe Company at the end of the accounting year, December 31, 2009, showed the following: A Give all the required closing entries for Ward Company at December 31, 2009 B Calculate the 2009 ending balance in retained earnings A B $59,000 + 8,000 = $67,000 (balance of retained earnings at the end of 2009) AACSB Tag: Analytic Difficulty: Hard L.O.: 4-58 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 004: Adjustments, Financial Statements, and the Quality of Earnings 112 Air Cargo Company recorded the following adjusting entries at the end of the accounting year, December 31, 2009: Before these adjusting entries were recorded, a partial unadjusted trial balance reflected the following: Give the closing entries for Air Cargo Company at December 31, 2009 AACSB Tag: Analytic Difficulty: Hard L.O.: 4-59 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 004: Adjustments, Financial Statements, and the Quality of Earnings 113 At December 31, 2009, the following adjusting entries were recorded in the accounts of CPA Company: There were no other accrued receivables or payables on CPA's books in 2009 Calculate the balances in the following accounts immediately after the closing entries were posted AACSB Tag: Analytic Difficulty: Medium L.O.: 114 On September 1, 2009, RF Corporation collected rent of $2,400 for one year in advance What adjusting entry is required on December 31, 2009? AACSB Tag: Analytic Difficulty: Easy L.O.: 4-60 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 004: Adjustments, Financial Statements, and the Quality of Earnings Matching Questions 115 Match the definitions with the steps in the information processing cycle Journalizing Financial statements Posting Collection of original data Trial balance Economic data are collected at time of occurrence for each transaction Each amount in the journal is transferred to the appropriate account in the ledger Each transaction is recorded in chronological order Accounts are listed with their debit or credit balances indicated in the appropriate column to provide a check on the equality of the debits and credits The information on the adjusted trial balance is used to develop the income statement, balance sheet, etc AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 116 Match the following entry descriptions with the accounting entries to which they relate They must be determined before the financial statements for the period are prepared They affect both nominal and real accounts Clears the nominal account balances at the end of the period Adjusting entries Closing entries Both adjusting and closing entries AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 4-61 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank,visit visithttp://downloadslide.blogspot.com http://downloadslide.blogspot.com Chapter 004: Adjustments, Financial Statements, and the Quality of Earnings 117 This question focuses on the information processing cycle and the accounting model For each item listed, indicate the best description Entries at the end of the period necessary to measure income An expense incurred but not recorded nor paid Revenues collected but not earned Balance sheet accounts Income statement accounts End-of-period entries to transfer balances of temporary accounts to another account Closing entries Nominal accounts Unearned revenues Accrued expense Real accounts Adjusting entries AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 118 Below are listed some other classifications of accounts You are to identify them as either income statement or balance sheet accounts Temporary accounts Closed at the end of the accounting period Nominal accounts Real accounts Permanent accounts Not closed at the end of the accounting period Income statement accounts Balance sheet accounts Balance sheet accounts Income statement accounts Balance sheet accounts Income statement accounts AACSB Tag: Relative Thinking Difficulty: Medium L.O.: 4-62 ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e ... ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank, visit visithttp://downloadslide.blogspot.com... ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank, visit visithttp://downloadslide.blogspot.com... ©2009 McGraw-Hill Inc Test Bank to accompany Libby Financial Accounting 6/e To Todownload downloadmore moreslides, slides,ebook, ebook,solutions solutionsand andtest testbank, bank, visit visithttp://downloadslide.blogspot.com