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Accounting Chapter 4 Homework Flashcards
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Questions and Answers
What is the adjusting entry for wages expense at trotman's variety store.
Debit: Wages Expense: 2700; Credit: Wages Payable: 2700
What is the adjusting entry for office supplies expense at Trotman's Variety Store?
Debit: Office Supplies Expense: 675; Credit: Office Supplies: 675
What is the adjusting entry for rent receivable at Trotman's Variety Store?
Debit: Rent Receivable: 1120; Credit: Rent Revenue: 1120
What is the adjusting entry for depreciation expense at Trotman's Variety Store?
<p>Debit: Depreciation Expense: 12100; Credit: Accumulated Depreciation: 12100</p> Signup and view all the answers
What is the adjusting entry for insurance expense at Trotman's Variety Store?
<p>Debit: Insurance Expense: 600; Credit: Prepaid Insurance: 600</p> Signup and view all the answers
What is the adjusting entry for unearned rent revenue at Trotman's Variety Store?
<p>Debit: Unearned Rent Revenue: 1200; Credit: Rent Revenue: 1200</p> Signup and view all the answers
What is the adjusting entry for repair accounts receivable at Trotman's Variety Store?
<p>Debit: Repair Accounts Receivable: 800; Credit: Repair Shop Revenue: 800</p> Signup and view all the answers
What should the adjusted trial balance for Hagadorn Company include for Accounts Receivable?
<p>420</p> Signup and view all the answers
Which account represents the amount of money owed for interest revenue that has been earned but not yet collected?
<p>Interest Receivable</p> Signup and view all the answers
Match each term with its definition:
<p>Deferred revenue = At year-end, service revenue of $1,000 was collected in cash but was not yet earned. Accrued revenue = Interest of $550 on a note receivable was earned at year-end, although collection of the interest is not due until the following year. Accrued expense = At year-end, wages payable of $5,600 had not been recorded or paid. Deferred expense = Office supplies were purchased during the year for $700, and $100 of them remained on hand (unused) at year-end.</p> Signup and view all the answers
What adjusting entry is recorded for the rent collected in advance?
<p>Debit: Unearned rent revenue: 300, Credit: Rent revenue: 300</p> Signup and view all the answers
For the Catena's Marketing Company, what was the total net income for the current year?
<p>5,270</p> Signup and view all the answers
What was the amount of dividends declared by Catena's Marketing Company?
<p>600</p> Signup and view all the answers
What is the annual reporting period for Elena's Traveling Veterinary Services, Inc.?
<p>January 1 to December 31</p> Signup and view all the answers
What is the amount of interest expense to be reported for the loan borrowed by Elena's Company?
<p>5,000</p> Signup and view all the answers
How much should be reported for insurance expense on the Current year's income statement?
Based on the adjusted trial balance, what is the total assets for catena's marketing company.
<p>20,490</p> Signup and view all the answers
What is the closing balance for Prepaid Insurance at the end of the current year?
<p>4,200</p> Signup and view all the answers
What was the direction of effect on the balance sheet for wages earned by employees but unpaid at year-end for Dodie Company?
<p>Increase in liabilities</p> Signup and view all the answers
How much is credited to shipping supplies for the current year?
<p>68,000</p> Signup and view all the answers
Study Notes
Adjusted trial balances.
- Hagadorn Company's adjusted accounts at year-end include various elements such as Accounts Payable ($250), Accounts Receivable ($420), and Cash ($175).
- The trial balance summarizes debits and credits across different account types, with specific totals for expenses such as Salaries Expense ($640) and Sales Revenue ($2,400).
Revenue Recognition Terminology
- Deferred Revenue : Service revenue collected but not yet earned ($1,000).
- Accrued Revenue : Interest earned but not received ($550).
- Accrued Expense : Unpaid and unrecorded wages ($5,600).
- Deferred Expense : Office supplies purchased with some remaining at year-end ($100 of $700 total).
Adjusting Entries for Catena's Marketing Company
- Adjusting entries reflect revenue recognition and expenses incurred, entailing consideration of cash flow timings.
- For rent collected in advance, $1,200 is adjusted to reflect earned revenue over the period ($300 recognized).
- Depreciation expense for machinery recorded as $3,200.
- Insurance expense adjustment reflects a two-year premium with a pro-rated expense of $1,250 recognized.
Catena's Financial Statements
- Income Statement summarizes revenues ($38,500) and key operating expenses ($31,430), revealing an Operating Income of $7,070 and a Net Income after taxes of $5,270.
- Statement of Stockholder's Equity highlights changes in stock and retained earnings, ending with Total Equity at $10,370.
- Balance Sheet outlines total assets ($20,490), liabilities ($10,120), and stockholders' equity, confirming the accounting equation is balanced.
Financial Ratios
- Total Asset Turnover for Catena calculated using sales relative to average total assets, yielding a ratio of 2.11, signifying efficient asset utilization.
Adjustments for Dodie Company
- Unpaid wages at year-end ($4,000) and earned but uncollected interest ($1,500) both necessitate adjusting entries to maintain accurate records.
Adjustments for Elena's Veterinary Services
- Insurance expense recognized annually with $5,000 recognized as interest expense for a $60,000 loan.
- Utilities expense of $360 recorded for services rendered without prior payment.
Adjustments for A+T Williamson Company
- Insurance premium adjustments lead to an Insurance Expense of $600 recognized.
- The reduction in Shipping Supplies Expense results in $68,000 due to purchases and remaining supplies.
Trotman's Variety Store Adjustments
- Wages earned but unpaid require an entry of $2,700 reflecting accrued expenses.
- Office Supplies Adjustment shows $675 expense recognized from total purchases versus year-end counts.
- Rent adjustment for unpaid amounts totaling $1,120 reflects deferred revenues while accrued depreciation and insurance expenses align with actual usage.
Transaction Classifications
- Categorization of transactions into deferred and accrued revenues/expenses helps to clarify accounting practices.
- Understanding the nature of each type of transaction aids in accurately preparing adjusting entries and maintaining financial integrity in reporting.
Adjusting Entries Summary
- Essential for accurate representation of financial situations at year-end, ensuring compliance with accounting standards and correct profit reporting.
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Test your knowledge of key accounting concepts with these flashcards based on Chapter 4. Review adjusted accounts, balances, and important terms relevant to year-end accounting figures. Perfect for reinforcing your understanding prior to exams or quizzes.
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Multiple Choice
The revenue recognition principle mandates that revenue be reported when earned, regardless of when the revenue is collected. For this reason, when revenue is earned but not yet collected, an accrual entry is required to accurately report revenue earned. For the same reason, when cash is collected, in advance of the earnings process, a deferral entry is required, to accurately report revenue earned.
Analyzing transactions (to enable journal entries) is the only analytical part of the accounting cycle. Analysis is required for both the original transaction entries and the adjusting entries. All of the other steps are just methodical posting of the entries, summarizing of the balances, regrouping of the accounts for financial reports, and closing of the accounts for year-end. Only the journal entries require decision-making processes.
Accruals—when cash has not moved, but it is time to record the transaction (examples: Accounts Payable or Accounts Receivable). Deferrals—when cash has moved, but it is not time to record the transaction (examples: Prepaid Insurance or Unearned Revenue).
Adjusting entries always include at least one income statement account and at least one balance sheet account, because the adjustment process is done to shift revenues and expenses between the Balance Sheet and the Income Statement, depending on whether it is the correct period to include that income or expense (report on the Income Statement) or not (report on the Balance Sheet).
An entry to adjust the supplies account to the $400 balance is needed; Debit Supplies Expense for 800; Credit Supplies for 800.
An entry to adjust the Prepaid Insurance account to $6,000 balance is needed; Debit Insurance Expense for 6,000; Credit Prepaid Insurance for 6,000.
The adjusted trial balance is the summary of account balances after the adjustments have been posted, so it reflects the corrected balances of all accounts.
(A) Income Statement; (B) Balance Sheet; (C) Balance Sheet; (D) Income Statement; (E) Retained Earnings Statement; (F) Balance Sheet
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- Authors: Mitchell Franklin, Patty Graybeal, Dixon Cooper
- Publisher/website: OpenStax
- Book title: Principles of Accounting, Volume 1: Financial Accounting
- Publication date: Apr 11, 2019
- Location: Houston, Texas
- Book URL: https://openstax.org/books/principles-financial-accounting/pages/1-why-it-matters
- Section URL: https://openstax.org/books/principles-financial-accounting/pages/chapter-4
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COMMENTS
Interest of $550 on a note receivable was earned at year-end, although collection of the interest is not due until the following year. 3. At year-end, wages payable of $5,600 had not been recorded or paid. 4. Office supplies were purchased during the year for $700, and $100 of them remained on hand (unused) at year-end.
The last step of the accounting cycle is to. prepare a post-closing trial balance. All of the following accounts will appear on the post-closing trial balance EXCEPT. During the accounting period, Cash was debited for $4,000, $3,000, and $1,000. Cash was also credited for $3,000, $500, and $100. The beginning balance of Cash was a $10,000 debit.
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