The following is information from a certain corporation's financial records for the current fiscal year. Show
What is the company's net income for the current year using the accrual basis of accounting? Debit Supplies Expense for $2,400 and credit Supplies for $2,400. The company began the period with $3,500 of supplies on hand. By the end of the period, only $1,100 of supplies remained on hand. Supplies is a prepaid expense; prepaid expenses are costs that expire either with the passage of time or through use. By the end of the period, a portion of the supplies had been used. An adjusting entry is necessary to reduce the supplies account so that it will report the actual amount of supplies on hand at the end of the period. The adjusting entry debits supplies expense and credits supplies by $2,400 (i.e., $3,500 - 1,100 = $2,400). A corportion pays its rent of $48,000 annually on January 1 and makes monthly adjusting entries. If the February 28 monthly adjusting entry for prepaid rent is omitted, which of the following are true? - Failure to make the adjustment does not affect the February financial
statements. Assets will be overstated by $4,000 and net income and stockholders' equity will be overstated by $4,000. paying $48,000 for one-year of rent in advance results in an increase in prepaid rent and a decrease in cash. By the end of one month, one-twelfth of the prepaid rent has expired and the company should record an adjusting entry that decreases the balance of the prepaid rent account and in-crease rent expense by $4,000 (i.e., $48,000 x 1/12 = $4,000). If the company forgot to record a prepaid rent adjusting entry, prepaid rent (and total assets) would be overstated and rent expense would be understated. Understating expenses overstates net income, retained earnings, and total stockholders' equity. Salaries and Wages Payable ....................... 40,000 At year-end, the corporation will record an adjusting entry debiting salaries and wages expense of $40,000 and salaries and wages payable of $40,000. In the next month, it will pay $60,000 in cash while reducing the salaries and wages payable by $40,000 and increasing salaries and wages expense of $20,000. Based on the following adjusted trial balance: Cash Accounts Receivable Inventory Building Accumulated Depreciation $ 2,000 1,000 21,000 6,000 Revenues 8,000 Insurance Expense $ 38,000 $10,000 Permanent accounts (i.e., assets, liabilities, and equities) are not closed. Temporary accounts (i.e., revenues, expenses, and dividends) are closed to retained earnings (i.e., an Income Summary account can be used as an intermediate step). Closing revenues increases retained earnings. Closing dividends and expenses decreases retained earnings. Post-closing: Ending retained earnings = beginning retained earnings + revenues - expenses - dividends = $6,000 + 8,000 - 1,000 - 1,000 - 2,000 = $10,000 $6,950. The difference between (i) the adjusted trial balance and (ii) the post-closing trial balance is the effect of the closing entries. Closing entries transfer end-of-period balances from the revenue accounts, expense accounts, and dividend account to the retained earnings account. The closing process reduces revenue accounts to zero and increases retained earnings, and this merely reduces the credit balance in revenue accounts and increases the credit balance in retained earnings (i.e., the total debits balance and total credit balance do not change when revenue is closed). In contrast, the closing process reduces expense and dividend accounts to zero (i.e., which reduces the total debits) and decreases retained earnings lowing the credit balance in retained earnings. So, closing expenses and dividends lowers both the total debit balance and the total credit balance. Total credits in the post-closing trial balance = the total credits of the adjusted trial balance - expenses and dividends (if any). Total credits in the post-closing trial balance = 8,650 - 1,200 - 300 - 200 = 6,950 The following is information is from a certain corporation's financial records for the current fiscal year. What is the company's net income for the current year using the accrual basis of accounting? The year-end trial balance for Garnet & Gold Corporation appears as follows: $ 6,500. $ 6,500 Based on the following adjusted trial balance: Debit Accounts Receivable Inventory Building Accumulated Depreciation $ 2,000 1,000 21,000 6,000 Revenues 8,000 Insurance Expense $ 38,000 $10,000 Permanent accounts (i.e., assets, liabilities, and equities) are not closed. Temporary accounts (i.e., revenues, expenses, and dividends) are closed to retained earnings (i.e., an Income Summary account can be used as an intermediate step). Closing revenues increases retained earnings. Closing dividends and expenses decreases retained earnings. Post-closing: Ending retained earnings = beginning retained earnings + revenues - expenses - dividends = $6,000 + 8,000 - 1,000 - 1,000 - 2,000 = $10,000 The accounting cycle is a series of certain steps that businesses, such as corporations, perform in sequence and repeat in each accounting period. Although steps may be missing among the options listed below, which of the following lists steps of the accounting cycle in their correct order? Journalize the transactions, post the adjusting entries, journalize the closing entries. Post the transactions, post the closing entries, and post the adjusting entries. Journalize the closing entries, prepare the adjusted trial balance, and prepare the financial statements, Post the transactions, journalize the transactions, and prepare a trial balance. Prepare the financial statements, journalize the adjusting entries, and post the closing entries. Journalize the transactions, post the adjusting entries, journalize the closing entries. The correct order is (i) use source documents to analyze transactions, (ii) journalize transactions, (iii) post transactions to the ledger, (iv) prepare the trial balance, (v) journalize and post the adjusting entries, (vi) prepare the adjusted trial balance, (vii) prepare the financial statements, (viii) journalize and post the closing entries, (ix) and prepare the post-closing trial balance. The
following is information is from a certain corporation's financial records for the current fiscal year. What is the company's net income for the current year using the accrual basis of accounting? Based on the following adjusted trial balance: Debit Accounts Receivable Inventory Building Accumulated Depreciation $ 3,000 500 21,000 5,000 Revenues 7,000 Insurance Expense $ 36,500 $9,000 Permanent accounts (i.e., assets, liabilities, and equities) are not closed. Temporary accounts (i.e., revenues, expenses, and dividends) are closed to retained earnings (i.e., an Income Summary account can be used as an intermediate step). Closing revenues increases retained earnings. Closing dividends and expenses decreases retained earnings. Post-closing: Ending retained earnings = beginning retained earnings + revenues - expenses - dividends = $5,000 + 7,000 - 1,000 - 1,000 - 1,000 = $9,000 $7,200. The difference between (i) the adjusted trial balance and (ii) the post-closing trial balance is the effect of the closing entries. Closing entries transfer end-of-period balances from the revenue accounts, expense accounts, and dividend account to the retained earnings account. The closing process reduces revenue accounts to zero and increases retained earnings, and this merely reduces the credit balance in revenue accounts and increases the credit balance in retained earnings (i.e., the total debits balance and total credit balance do not change when revenue is closed). In contrast, the closing process reduces expense and dividend accounts to zero (i.e., which reduces the total debits) and decreases retained earnings lowing the credit balance in retained earnings. So, closing expenses and dividends lowers both the total debit balance and the total credit balance. Total credits in the post-closing trial balance = the total credits of the adjusted trial balance - expenses and dividends (if any).Total credits in the post-closing trial balance = 8,450 - 150 - 600 - 500 = 7,200 Post the transactions, journalize the adjusting entries, and prepare the financial statements. The correct order is (i) use source documents to analyze transactions, (ii) journalize transactions, (iii) post transactions to the ledger, (iv) prepare the trial balance, (v) journalize and post the adjusting entries, (vi) prepare the adjusted trial balance, (vii) prepare the financial statements, (viii) journalize and post the closing entries, (ix) and prepare the post-closing trial balance. What is the effect on the financial statements when a company fails to accrue revenue earned at year end?Answer and Explanation: The effect on financial statements when a company fails to accrue interest expenses at the end of the year is b) expenses are understated and liabilities are understated. The entry recording the missed expenses would have debited the interest expense and credited the liability interest payable.
What happens when a company fails to accrue revenue?Answer and Explanation: Answer : Net income is overstated and liabilities are understated.
What is the effect on the financial statements when a company fails to record?If a company fails to record depreciation expense, net income and assets are overstated. If depreciation expense is not recorded, expenses are understated, and net income is overstated.
What effect on the financial statement of the year would there be if a company fails to adjust a prepaid rent account for rent that has expired?If a company fails to adjust a Prepaid Rent account for rent that has expired, what effect will this have on that month's financial statements? Failure to make an adjustment does not affect the financial statements. Expenses will be overstated and net income and stockholders' equity will be understated.
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What is the effect on the financial statements when a company fails to accrue revenue earned at year end quizlet?
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