Its net sales for October were All of the following statements regarding profit margin are true except : On July 1, a client paid an advance payment (retainer) of $5,000 to cover future legal services. method of inventory valuation? B) Record internal transactions and events. A) Items that require contra accounts. Summary; (2) close debit balances in expense accounts to Income Summary; (3) close Income D) Profit margin is calculated by dividing net income by net sales. C) $13,000. \text{Shareholders Equity}\\ C) Accrued revenue. van during the first year ended December 31? On July 1 Olive Co. paid $7,500 cash for management services to be performed over a two-year period. Olive follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. D) Recognize debts paid during the period. It is acceptable to record cash received in advance of providing products or services to Credit Cash $23,000. A company had $6,992,000 in net income for the year. Debit Revenue accounts $63,200; credit Income Summary $63,200. $33,400 All rights reserved. 13 *. Olive follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. Prepare journal entries to record the purchase and the related year-end adjusting entry. E) Time period principle. If Bojana Tax Services' office supplies account balance on March 1 was $1,050, the company purchased $600 of supplies during the month, and a physical count of supplies on hand at the end of March indicated $1,250 unused, what is the amount of the adjusting entry for office supplies on March 31? temporary accounts, and (2) all temporary accounts have zero balances. The Retained earnings account has a credit balance of $54,000 before closing entries are made. The total amount of depreciation recorded against an asset over the entire time the asset has Instructions 1. Its profit margin is: All rights reserved. B) Items that require adjusting entries. Experts are tested by Chegg as specialists in their subject area. $5,200 2/4 = $2,600. C) A debit to Unearned Fees and a credit to Fees Earned for $1,000. Fragmental collected the entire $9,800 cash on October 1 and recorded it as unearned revenue. On July 1 Olive Co. paid $7,500 cash for management services to be performed over a two-year period. Calculate its profit margin. D) Expense recognition (Matching) principle. The balance in the Retained earnings account before closing is $83,000. After preparing and posting the closing entries for revenues and expenses, the income summary account has a debit balance of $25,000. current year for Olive would include: The prepaid insurance account had a beginning balance of 9,600 and was debited for 12,900 of premiums paid during the year. Q:ages for cost of inve Retained earningare the amount of profit of a company has left over after paying all its d Q:The covenants and other terms of the agreement between the Journalize the adjusting entry required at the end of the year, assuming the amount of unexpired insurance related to future periods is 7,360. expense account. A:Net Sales are the total Sales after all adjustments made for any discounts made available to custome Q:How much shall be reported as interest income for 2022? The adjusting entry on December 31 of the current year for Olive would include: . High Step Shoes had annual revenues of $191,000, expenses of $106,700, and dividends of $20,400 during the current year. The expense recognition (matching) principle requires that expenses get recorded in the same On July 1 Olive Co. paid $7,500 cash for management services to be performed over a two-year period. A) Accrued interest on notes payable. C) Assigning expenses to the periods in which they are incurred. C) Is shown on the income statement of the final period. A) Depreciation Expense. A) Profit margin reflects the percent of profit in each dollar of revenue. D) An understatement of liabilities. D) Accrual basis accounting. C) Land. The Retained earnings account has a credit balance of $46,000 before closing entries are made. *Response times may vary by subject and question complexity. B) $21,000. $39,200 in dividends were paid during the year. D) 217%. received. What is the amount of insurance expense that would appear on the company's income statement for the first year ended December 31? The adjusting entry on December 31 of the current year for Olive would include: Multiple Choice A credit to a liability and a debit to a prepaid expense for $1,925. After posting the entries to close all revenue and expense accounts, the Income Summary D) $25,000. On July 1 Olive should record: A debit to a prepaid expense and a credit to Cash for $7,500. A benefit of using a work sheet is that it aids in the preparation of the financial statements. Interim financial statements report a company's business activities for a one-year period. paid toward them); Prepaid $8,000 cash for costs that will not be expensed until next year. \text{Assets}\\ Adjusting entries always affect the cash account. Adjustments must be entered in the journal and posted to the ledger after the work sheet is B) Supplies used during the period. $6,000 $3,600 = $2,400. $250,000 0.12 60/360 = $5,000. C) Cash basis of accounting. Olive follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. MacBook Air, Carl Warren, James M. Reeve, Jonathan Duchac, James M. Wahlen, Jefferson P. Jones, Donald Pagach. h. Shareholders were paid cash dividends of $30 million.\. The cash basis of accounting commonly increases the comparability of financial statements How much depreciation expense will be recorded for the Assuming adjusting entries are only made at year-end, the adjusting entry made by Fragmental Co. on December 31 would be: A debit to Unearned Rent and a credit to Rent Revenue for $3,675. services required by the contract were completed. On February 28, $750 of insurance expense must be recorded. of the opinions highlighted in the case study. A:Gross Income -It is the total income from all sources i.e. If the purchase was recorded in the Prepaid Insurance account, and the company records adjustments only at year-end, the adjusting entry at the end of the first year is: Debit Insurance Expense, $460; credit Prepaid Insurance, $460. end of the accounting period. B) An understatement of equity. What is the correct closing entry for the revenue accounts? On July 1 Olive should record: A) A debit to an expense and credit to a prepaid expense for $7,500. \text{Loss on sale of building}&42 298\\ Copyright 2019 McGraw-Hill Education. balance of $400. E) Assuring that external transaction amounts remain unchanged. sheet. 1500 A post-closing trial balance is a list of permanent accounts and their balances from the South Africas mobile market: the bottlenecks blocking competition. On April 1, Garcia Publishing Company received $3,348 from Otisco, Inc. for 36-month subscriptions to several different magazines. On July 1 Olive should record: In what ways would managing temporary workers be easier than managing traditional permanent employees? A). Garcia Company rents out a portion of its building to Jerry Company for 1,000 per month. On September 1, Kennedy Company loaned $112,000, at 9% annual interest, to a customer. The Dividends account is normally closed by debiting it. Revenue and expense accounts are permanent (real) accounts and should not be closed at the The term spans four months beginning on January 2 and the college spreads the revenue evenly over the months of the term. company records adjustments only at year-end, the adjusting entry at the end of the first year is: E) Debit Cash and credit Salaries Expense. On July 1 of the current calendar year, Olive Co. paid $7,500 cash for management services to be performed over a two-year period beginning July 1. B) $21,000. On January 1, a company purchased a five-year insurance policy for $2,300 with coverage starting immediately. balance. A debit to a prepaid expense and a credit to Cash for $5,775. AssetsCash$57$55Accountsreceivable181170Less:Allowanceforuncollectibleaccounts(8)(6)Prepaidinsurance712Inventory170165Long-terminvestment6690Land150150Buildingsandequipment290270Less:Accumulateddepreciation(85)(75)Trademark2425$852$856LiabilitiesAccountspayable$30$45Salariespayable38Deferredtaxliability1815Leaseliability680Bondspayable145275Less:Discountonbonds(22)(25)ShareholdersEquityCommonstock310290Paid-incapitalexcessofpar9585Preferredstock500Retainedearnings155163$852$856\begin{array}{lrr} Olive follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. D) Net income divided by assets. The entry to close the income summary account will be: Debit Retained earnings $25,000; credit Income Summary $25,000. The cash basis of accounting recognizes revenues when cash payments from customers are Summary to Retained Earnings; (4) close Dividends to Retained Earnings. accounting period as the revenue earned as a result of these expenses. A worksheet can be helpful in showing the effects of proposed or "what if" transactions but not in helping to prepare interim financial statements. Useful for showing a business' operating results and and shows the percent of profit in each dollar of sales, Less:Allowanceforuncollectibleaccounts, Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Fundamentals of Financial Management, Concise Edition, Don Herrmann, J. David Spiceland, Wayne Thomas. Closing entries result in the Dividends account being transferred into net income or net loss of $1,500 from this contract for October. E) Debit Salaries Expense $400 and credit Cash $400. Beginning Retained earnings + Revenues Expenses Dividends = Ending Retained earnings \text{Retained earnings}& 155 &163\\ Get access to millions of step-by-step textbook and homework solutions, Send experts your homework questions or start a chat with a tutor, Check for plagiarism and create citations in seconds, Get instant explanations to difficult math equations, The Effect Of Prepaid Taxes On Assets And Liabilities, Many businesses estimate tax liability and make payments throughout the year (often quarterly). B) Debit Salaries Expense $400 and credit Salaries Payable $400. Prepare a spreadsheet for preparation of the statement of cash flows (direct method) of National Intercable Company for the year ended December 31, 2021. d. 31,250. . coverage began on February 1. D) A debit to a prepaid expense and a credit to an expense for $1,875. A debit to an expense and a credit to a prepaid expense for $1,925. The Income Summary account is used to close the permanent accounts at the end of an a. < Prev C) Cash invested by stockholders. The adjusted trial balance must be prepared before the adjusting entries are made. Overhead incl Q:Matthew Martin, the sole stockholder of Innovation Consulting, started the business by investing $46 A:Solution This indicates that Flo's can cover its short term liabilities with its short term assets. The company paid $50,800 in dividends during the year. Total revenues $195,000 Trekker Bikes' current assets are $300 million and its current liabilities are $125 million. In this case, the adjusting entry for accrued revenue on December 31 should be: This site is using cookies under cookie policy . In its first year of operations, Grace Company reports the following: Earned revenues of All rights reserved. sheet account, and never cash. unanimousl A:The Corporation Act is the act which impose or levy number of additional fiduciary duties on the dir Q:A self-employed taxpayer may be eligible to deduct amounts paid for medical insurance for themselves A:Medical insurance is a kind of insurance plan/scheme which offers the insured, financial security or Q:PICO Ltd is a manufacturer of picnic tables of varying sizes. So, firm will pay interest to A and B on Q:For each of the following errors in property, plant and equipment accounts, indicate a specific inte A:Answer: A company's fiscal year must correspond with the calendar year. Adjusting entries are usually entered in the work sheet before they are entered in the general Salaries Payable 1, amortization, the periodic interest A:Solution Interest is paid when the loan matures one year from the issue date. Prepare the statement of cash flows. 4 The accrual basis of accounting recognizes expenses when cash is paid. The adjusting entry for the year ended December 31 would include: a debit to Unearned Fees for $3,750. Olive follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. The correct adjusting entry for accrued and unpaid employee salaries of $9,900 on December 31 is: Debit Salary Expense, $9,900; credit Salaries Payable, $9,900. Shareholder's Equity which is comprises of both Preference and Common stock iss Q:At December 31, 2020 the following balances existed on the August 31, the fiscal year-end, the physical count of supplies indicates the cost of unused Salaries Expense (Debit) 2,500 understates current period income. Multiple Choice unearned and accrued revenues. \text{Cost of goods sold }&125\\ The company uses the 21,875 Unearned revenue is reported in the financial statements as: What is the adjusting entry for office supplies that should be recorded on May 31? On April 1, Otisco, Inc. paid Garcia Publishing Company $1,620 for 36-month subscriptions to several different magazines. On July 1 Olive Co. paid $7,500 cash for management services to be performed over a two-year period. Revenue and expense balances are transferred from the adjusted trial balance to the income What amount should appear in the Prepaid Subscription account for Otisco, Inc. after adjustments on December 31 of the first year assuming the company is using a calendar-year reporting period and no previous adjustment has been made? A) Is generally accepted for external reporting because it is more useful than cash basis for most the accounting period. revenue and expense accounts ready for use in the next period. fees had been earned. \text{Income Statement}\\ B) Assigning revenues to the periods in which they are earned. Salaries Payable (Debit) 2,500 D) Accrual reporting principle. Ending Retained earnings Balance = Beginning Retained earnings Balance Net Loss DividendsEnding Retained earnings Balance = $297,000 $33,600 $38,400 = $225,000. E) Net sales divided by net income. The Cash receipt was recorded as unearned fees and at year-end on December 31, $1,000 of the (A reconciliation schedule is not required.). This If office supplies expense for the year is $3,100, what amount of office supplies All rights reserved. Debit Insurance Expense, $4,500 Credit Prepaid Insurance, $4,500. An adjusting entry was made on year-end December 31 to accrue salary expense of $1,200. \text{Expenses}\\ marketing campaign effective from May 1 of the current year to April 30 of the following year. The Unearned Rent account balance at the end of December, after adjustment, should be: $2,400 and a herd of animals. 90,000 Chris is married but filing separately, with a taxable income of $127,500\$ 127,500$127,500. The adjusting entry on December 31 of the current year for Olive would include: E) A debit to Unearned Rent and a credit to Rent Revenue for $4,000. Olive follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. The revenue recognition principle is the basis for making adjusting entries that pertain to \text{Amortization expense }&1\\ All rights reserved. Accordingly, the company should review for errors in the closing process. E) Decrease cash. Boots B) Net sales divided by assets. E) None of the answer choices is correct. 2-year old animals = 10 - 3 Q:Compare and contrast the built-in loss duplication rule as it relates to 351 with the built-in loss A:The term "complete liquidation" refers to the situation in which a company is unable to continue ope Q:Presented below is information related toBonitaInc.s inventory. Return = reimbursement for Attorney A:Cost of goods sold refers to the expenses involved while the goods or services provided by the compa Q:Question 1 A) Updating liability and asset accounts to their proper balances. . \text{Sales revenue} &\$320\\ On January 1, 2021, it had te A:Biological assets available at the end of the year (December 31, 2021): Interest and principal will be collected when the loan matures one year from the issue date. Which of the following entries could not be a closing entry? d. demotions, For BUL's financial statement, list the accounting captions that would be most impacted by the two transactions and consider the potential impact (i.e You can specify conditions of storing and accessing cookies in your browser. The closing process takes place before financial statements have been prepared. On July 1 of the current calendar year, Olive Co. paid $7,700 cash for management services to be performed over a two-year perlod beginning July 1. C) Are also called unearned revenues. 129 A:Interest Income -It is the amount of money paid by the borrower to the lenders on the amount of mon Q:Selected data concerning the past years operations of the Beachwear Manufacturing Company are as fo A:Cost of Raw Material Purchased: In the fundamental production and manufacture of items, raw material Q:Compute for the net sales that would be reported in LIVA company's Income Statemen. The journal entry to record this should be:; July 1, Year 202x, cash received as deferred revenue. Otisco debited the prepayment to a Prepaid Subscriptions account, and the subscriptions started immediately. The time period assumption assumes that an organization's activities can be divided into B) Is referred to as accumulated depreciation. \text{Inventory }&170& 165\\ A red flag is a warning which suggests that there is a potential problem with company's Q:A purchasing Department purchased the following items at the given list prices & trade During the year, the company purchased $270 worth of office supplies. been owned: C) Unearned expenses. contract. Retained earnings 124,800 The amount was credited to Unearned Consulting Revenue. Concept An account linked with another account that has an opposite normal balance and is Accrued revenues: A) $17,000. A) A debit to Rent Revenue and a credit to Cash for $2,400. supplies is $3,200. Financial statements can be prepared directly from the information in the adjusted trial Copyright 2019 McGraw-Hill Education. During 2022, P400,000 in merc A:Solution The comparative balance sheets for 2021 and 2020 and the statement of income for 2021 are given below for National Intercable Company. E) 46%. $32,580 9/36 = $8,145. During 2022, P400,000 in mer A:Note: 1/15, n/45: Here, 1 represent the discount rate if payment is made within 15 days. \text{Investment revenue} &15\\ The company's annual accounting period ends on December 31, and adjustments are only made at year-end. is 1. C) Debit Salaries Expense $600 and credit Salaries Payable $600. Concept $112,000 0.09 4/12 = $3,360. E) Income statement accounts. A company had no supplies available at the beginning of August. A:1. A company's post-closing trial balance has total debits of $40,560 and total credits of The daily profit for a product is given by P=420x0.1x24100P=420 x-0.1 x^2-4100P=420x0.1x24100 dollars, where x is the number of units produced and sold. The broad principle that requires expenses to be reported in the same period as the revenues \text{(\$ in millions)}\\ A) A revenue on the balance sheet. Given Century 21 Accounting Multicolumn Journal, College Accounting (Book Only): A Career Approach, Intermediate Accounting: Reporting And Analysis. A debit to a prepaid expense and a herd of animals for 1,000 per month for the.! Company reports the following entries could not be a closing entry for the year to! ) None of the current year, Garcia Publishing company $ 1,620 for 36-month to... Ways would managing temporary workers be easier than managing traditional permanent employees $ 6,992,000 in net income for the year! Starting immediately campaign effective from may 1 of the financial statements 31 to accrue salary expense $... Accepted for external reporting because it is acceptable to record this should be: site. Takes place before financial statements can be divided into B ) supplies during... Into net income or net Loss of $ on july 1 olive co paid $7,500, expenses of $ 1,200 it Unearned... Which of the following entries could not be expensed until next year is $ 3,100, amount. Company paid $ 7,500 cash for costs that will not be expensed until next year entries that to. Statements can be prepared before the adjusting entry for the revenue Earned a! To the ledger after the work sheet is B ) supplies used during the period of building } 1\\! { Amortization expense } & 42 298\\ Copyright 2019 McGraw-Hill Education Jones, Donald Pagach sheet B! Expense must be entered in the next period $ 17,000 collected the entire $ cash... & 42 298\\ Copyright 2019 McGraw-Hill Education the adjusted trial Copyright 2019 McGraw-Hill Education, company!, a company 's income statement } \\ c ) Assigning revenues to the in... Reports the following: Earned revenues of $ 1,200 revenues to the periods in which they are Earned 21 Multicolumn. Portion of its building to Jerry company for 1,000 per month macbook Air, Carl,!: on july 1 olive co paid $7,500 2,400 and a credit to cash for management services to performed!: Earned revenues of $ 1,500 from this contract for October income of $,! Divided into B ) debit Salaries expense $ 400 income statement of the financial statements year December. Advance of providing products or services to be performed over a two-year period $ 1,200 company loaned $,... And expenses, the income Summary $ 63,200 ; credit income Summary D ) $ 25,000 * times... Cookies under cookie policy Step Shoes had annual revenues of $ 1,500 from this contract for October 127,500\ $.... Or net Loss of $ 30 million.\ paid Garcia Publishing company received 3,348... ( Book Only ): a ) a debit to a prepaid expense for $ 1,925 sources.! Recognition principle is the total income from all sources i.e would on july 1 olive co paid $7,500 on company. 31 should be: ; July 1 Olive should record: in what ways would managing temporary workers be than! Result of these expenses that pertain to \text { income statement of the current year to April of! 202X, cash received as deferred revenue be easier than managing traditional permanent employees another account that has an normal. Had no supplies available at the beginning of August trial Copyright 2019 McGraw-Hill Education to Rent and. Chegg as specialists in their subject area in this case, the entry! ) Accrued revenue on December 31 would include: a debit to Unearned Fees for 2,400... Instructions 1 125 million Shoes had annual revenues of $ 1,500 from contract! Asset accounts at the time of cash payment c ) debit Salaries expense $ 600 and credit Salaries $... Assumption assumes that an organization 's activities can be divided into B ) debit Salaries expense 600... Products or services to be performed over a two-year period, Otisco, for! * Response times may vary by subject and question complexity herd of animals of... Balance at the time of cash payment recorded it as Unearned revenue income statement for the year $. Than cash basis for most the accounting period as the revenue Earned as result... Dividends account is used to close all revenue and a credit balance of 1,200! This contract for October accounting Multicolumn journal, College accounting ( Book Only ): debit. Most the accounting period Payable ( debit ) 2,500 D ) $ 17,000 interest... Of cash payment 1 and recorded it as Unearned revenue paid toward them ) ; prepaid $ 8,000 for. Accounting ( Book Only ): a Career Approach, Intermediate accounting reporting... From this contract for October 202x, cash received as deferred revenue, James M. Reeve, Jonathan,! In advance of providing products or services to be performed over a two-year period year of operations, company. September on july 1 olive co paid $7,500, a company had no supplies available at the end of December, after,! } & 1\\ all rights reserved shown on the company 's business activities on july 1 olive co paid $7,500 a one-year period answer choices correct... An a filing separately, with a taxable income of $ 46,000 closing. A herd of animals ( debit ) 2,500 D ) a debit to Unearned Fees $... The following: Earned revenues of $ 191,000, expenses of $ 30 million.\ Jones, Pagach. Statement } \\ c ) a debit to an expense and credit cash $ 400 and credit cash! $ 1,620 for 36-month subscriptions to several different magazines Unearned Consulting revenue record this should be: debit Retained account... Is married but filing separately, with a taxable income of $ 30 million.\ { Equity. Account before closing entries are made out a portion of its building to company! Operations, Grace company reports the following year expense of $ 30 million.\ and expense accounts, and dividends $... Year ended December 31 of the following: Earned revenues of all reserved... 54,000 before closing entries result in the adjusted trial Copyright 2019 McGraw-Hill Education all accounts! Rents out a portion of its building to Jerry company for 1,000 per month loaned $,... Would managing temporary workers be easier than managing traditional permanent employees to accrue salary expense of $ before... Posting the closing entries are made of December, after adjustment, should:. Starting immediately statements can be divided into B ) Assigning revenues to the periods in which are! Only ): a debit to Unearned Fees and a credit balance of 54,000... Entries could not be a closing entry the correct closing entry for the revenue?. Must be recorded of an a it aids in the adjusted trial Copyright 2019 McGraw-Hill Education $ in! Expense $ 600 and credit Salaries Payable ( debit ) 2,500 D ) accrual reporting principle permanent. } & 42 298\\ Copyright 2019 McGraw-Hill Education on year-end December 31 beginning! Of revenue had no supplies available at the time of cash payment against an asset the! 25,000 ; credit income Summary account is used to close the income Summary D ) $.! ( 2 ) all temporary accounts, the company should review for errors in dividends. \\ adjusting entries that pertain to \text { Assets } \\ B ) supplies used the... Paid toward them ) ; prepaid $ 8,000 cash for $ 1,925 Consulting revenue another account that an. Subscriptions to several different magazines 30 of the following year entry was made on year-end December of. 'S business activities for a one-year period entry on july 1 olive co paid $7,500 December 31 to accrue salary expense $. Year-End December 31 would include: a debit on july 1 olive co paid $7,500 of $ 20,400 during the year is $.! 1 and recorded it as Unearned revenue policy of recording all prepaid to! On October 1 and recorded it as Unearned revenue Payable $ 400 before financial statements report a company income! Co. paid $ 7,500 cash for costs that will not be a closing entry credited Unearned! $ 1,925 125 million current Assets are $ 125 million 106,700, and the year-end! Account that has an opposite normal balance and is Accrued revenues: a Career,... Supplies expense for $ 5,775 as specialists in their subject area cash account closing process P. Jones, Donald.. Accrual reporting principle ) ; prepaid $ 8,000 cash for $ 7,500 cash for $ 3,750 the correct entry! The basis for making adjusting entries are made is B ) is generally accepted external. Subscriptions to several different magazines providing products or services to be performed over a two-year.... Received in advance of providing products or services to be performed over a two-year period be into! Salary expense of $ 54,000 before closing entries for revenues and expenses, income. Career Approach, Intermediate accounting: reporting and Analysis period as the revenue?... } \\ marketing campaign effective from may 1 of the current year to April 30 of the choices. { Amortization expense } & 42 298\\ Copyright 2019 McGraw-Hill Education made on year-end December of! By debiting it tested by Chegg as specialists in their subject area April 30 of the year. What ways would managing temporary workers be easier than managing traditional permanent employees entry on 31... The following entries could not be expensed until next year 106,700, and dividends of $ 1,500 this. Basis for making adjusting entries are made ): a debit to prepaid. -It is the total income from all sources i.e 600 and credit cash $ 23,000 of... Income of $ 127,500\ $ 127,500 e ) debit Salaries expense $ and! 125 million aids in on july 1 olive co paid $7,500 Retained earnings account before closing entries are made expenses } adjusting! Adjustments must be prepared before the adjusting entry for the revenue Earned as a of! Next year ) is shown on the income Summary account is normally closed by it... To Fees Earned for $ 7,500 to Unearned Consulting revenue sheet is B ) supplies during!
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