What is the purpose of closing entries?
> The following information for Kellman Inc. is available at the end of 2019. Total assets on 12/31/2018 $82,400 Common stock on 12/31/2018 $50,000 Total assets on 12/31/2019 88,500 Common stock on 12/31/2019 50,000 Total liabilities on 12/31/201 8 9
> Zachary Corporation’s December 31, 2018 balance sheet included the following amounts: Cash...................................... $ 20,400 Retained earnings.................. 105,600 Zachary’s accountant provided the following data for 2019: Revenues
> Walters Inc. began operations on January 1, 2019. The following information relates to Walters’ cash flows during 2019. Cash received from owners $201,500 Cash paid to purchase machine $32,000 Cash paid for purchase of land and Cash paid to
> Name and describe the three main types of business activities.
> At the end of 2018, Sherwood Company had retained earnings of $18,240. During 2019, Sherwood had revenues of $837,400 and expenses of $792,100, and paid cash dividends in the amount of $38,650. Required: 1. Determine the amount of Sherwood’s retained ea
> The following information is available for Wright Auto Supply at December 31, 2019. Cost of goods sold $292,000 Rent expense $ 21,000 Depreciation expense 31,250 Salaries (administrative) 33,800 Income taxes expense 32,520 Sales revenue
> The following information is available for Bergin Pastry Shop. Gross margin........................................................................... $34,700 Income from operations............................................................. 9,200 Inco
> ERS Inc. maintains and repairs office equipment. ERS had an average of 10,000 shares of common stock outstanding for the year. The following income statement account balances are available for ERS at the end of 2019. Advertising expense $24,200 Salar
> The following accounts exist in the ledger of Butler Company: salaries expense, advertising expense, cost of goods sold, depreciation expense, interest expense, income taxes expense, sales revenue, and utilities expense. Required: 1. Organize the above
> Balance sheet information for Milton Company is as follows: Required: Compute the missing values (a)–(j). All the necessary information is provided. (Hint: It is not necessary to calculate your answers in alphabetical order.) 201
> Jerrison Company operates a wholesale hardware business. The following balance sheet accounts and balances are available for Jerrison at December 31, 2019. Required: 1. Prepare a classified balance sheet for Jerrison at December 31, 2019. 2. Compute Je
> College Spirit sells sportswear with logos of major universities. At the end of 2019, the following balance sheet account balances were available. Accounts payable $104,700 Income taxes payable $ 11,400 Accounts receivable 6,700 Inventory 48
> On January 1, 2019, Mulcahy Manufacturing Inc., a newly formed corporation, issued 1,000 shares of common stock in exchange for $150,000 cash. No other shares were issued during 2019, and no shares were repurchased by the corporation. On November 1, 2019
> Swanson Products was organized as a new business on January 1, 2019. On that date, Swanson acquired equipment at a cost of $425,000, which is depreciated at a rate of $40,000 per year. Required: Describe how the equipment and its related depreciation wi
> Name and describe three different forms of business organization.
> What equation describes the income statement?
> Describe how items are ordered within the current assets and current liabilities sections on a balance sheet.
> Describe the items (other than the financial statements) found in the annual report.
> How is the retained earnings statement related to the balance sheet? How is the income statement related to the retained earnings statement?
> Name and describe the three categories of the statement of cash flows.
> Explain the items reported on a retained earnings statement.
> How does the multiple-step income statement differ from the single-step income statement?
> Name the two main components of stockholders’ equity. Describe the main sources of change in each component.
> Give an example of unethical behavior by a public accountant and describe its consequences.
> Listed below are several descriptions related to other items found in an annual report. Description Location in the Annual Report 1. An integral part of the financial a. Notes to the financial statements statements that hel
> What is an accounting entity?
> Listed below are three independent scenarios. Required: Compute the missing amount in each row. Assume no withdrawals or dividends. Balance Sheet: Income Statement: Balance Sheet: Scenario 1. Retained Earnings Net Income Retained Earnings S30,000 (
> Listed below are items that would appear on a statement of cash flows. a. Cash received from customers b. Cash paid for dividends c. Cash received from a bank loan d. Cash paid to suppliers e. Cash paid to purchase equipment Required: Indicate in which
> Listed below are events that affect stockholders’ equity. a. Reported net income of $85,000. b. Paid a cash dividend of $10,000. c. Reported sales revenue of $120,000. d. Issued common stock of $50,000. e. Reported a net loss of $20,000. f. Reported expe
> Which of the following is true regarding the accounting cycle? a. The accounts are adjusted after preparing the financial statements. b. Journal entries are made prior to the transaction being analyzed. c. The temporary accounts are closed after the fina
> Reinhardt Company reported revenues of $122,000 and expenses of $83,000 on its 2019 income statement. In addition, Reinhardt paid $4,000 of dividends during 2019. On December 31, 2019, Reinhardt prepared closing entries. The net effect of the closing ent
> Which of the following statements is incorrect regarding preparing financial statements? a. The adjusted trial balance lists only the balance sheet accounts in a ‘‘debit’’ and ‘‘credit’’ format. b. The adjusted trial balance is the primary source of info
> An analysis of the transactions of Rutherford Company for the year ended December 31, yields the following information: sales revenue, $65,000; insurance expense, $4,300; interest income, $3,900; cost of goods sold, $28,800; and loss on disposal of prope
> Hurd Inc. prepays rent every 3 months on March 1, June 1, September 1, and December 1. Rent for the 3 months totals $3,600. On December 31, 2019, Hurd will report Prepaid Rent of: a. $0 b. $1,200 c. $2,400 d. $3,600
> In September 2019, GolfWorld Magazine obtained $15,000 of subscriptions for 1 year of magazines and credited Unearned Sales Revenue. The magazines will begin to be delivered in October 2019. At December 31, 2019, GolfWorld should make the following adjus
> Ron’s Diner received the following bills for December 2019 utilities: . Electricity: $625 on December 29, 2019 . Telephone: $150 on January 5, 2020 Both bills were paid on January 10, 2020. On the December 31, 2019, balance sheet, Ron’s Diner will report
> Dallas Company loaned $10,000 to Ewing Company on December 1, 2019. Ewing will pay Dallas $720 of interest ($60 per month) on November 30, 2020. Dallas’s adjusting entry at December 31, 2019, is: a. Interest Expense........... 60 Cash ..................
> Which of the following statements is false? a. Adjusting entries are necessary because timing differences exist between when a revenue or expense is recognized and cash is received or paid. b. Adjusting entries always affect at least one revenue or expen
> Which transaction would require adjustment at December 31? a. The sale of merchandise for cash on December 30. b. Common stock was issued on November 30. c. Salaries were paid to employees on December 31 for work performed in December. d. A 1-year insura
> In December 2019, Swanstrom Inc. receives a cash payment of $3,500 for services performed in December 2019 and a cash payment of $4,500 for services to be performed in January 2020. Swanstrom also receives the December utility bill for $600 but does not
> Which of the following statements is true? a. Under cash-basis accounting, revenues are recorded when a company satisfies its performance obligations and expenses are recorded when incurred. b. Accrual-basis accounting records both cash and noncash trans
> How does accrual-basis net income differ from cash-basis net income?
> Describe the structure of the worksheet and the accounting information it contains.
> Below are items that may appear on the balance sheet. Item Classification 1. Buildings a. Current assets 2. Copyright b. Property, plant, and equipment 3. Supplies c. Intangible assets 4. Unearned service revenue d. Current lia
> What is the relationship between the accounting cycle and the worksheet?
> List the seven steps in the accounting cycle in the order in which they occur and explain what occurs at each step of the accounting cycle.
> Why are only the balance sheet accounts permanent?
> Identify each of the following categories of accounts as temporary or permanent: assets, liabilities, equity, revenues, expenses, dividends. How is the distinction between temporary and permanent accounts related to the closing process?
> Describe the four steps in the closing process.
> On the basis of what you have learned about adjustments, why do you think that adjusting entries are made on the last day of the accounting period rather than at several times during the accounting period?
> Describe the effect on the financial statements when an adjustment is prepared that records (a) Unrecorded revenue and (b) Unrecorded expense.
> How is the amount for an interest expense (or interest revenue) adjustment determined?
> Which type of adjustment will? (a) Increase both assets and revenues, (b) Increase revenues and decrease liabilities, (c) Increase expenses and decrease assets, and (d) Increase both expenses and liabilities?
> Financial information for three independent cases is as follows: a. The liabilities of Dent Company are $82,000, and its stockholders’ equity is $120,000. What is the amount of Dent’s total assets? b. The total assets of Wayne Inc. are $55,000, and its s
> What is the difference between an accrual and a deferral?
> For each of the four categories of adjusting entries, describe the business activity that produces circumstances requiring adjustment.
> Describe the recording of transactions that begin and end at a particular point in time and the recording of continuous transactions.
> What accounting concepts require that adjusting entries be employed?
> Why are adjusting entries needed?
> Provide two examples of transactions that begin and end at a particular point in time and two examples of continuous transactions.
> What happens during the accounting cycle?
> Explain when revenue may be recognized and give an example.
> The following information describes transactions for Morgenstern Advertising Company during July: a. On July 5, Morgenstern purchased and received $24,300 of supplies on credit from Drexel Supply Inc. During July, Morgenstern paid $20,500 cash to Drexel
> Heartstrings Gift Shoppe sells an assortment of gifts for any occasion. During October, Heartstrings started a Gift-of-the-Month program. Under the terms of this program, beginning in the month of the sale, Heartstrings would select and deliver a random
> Marni Restaurant Company engaged in the following transactions during March, its first month of operations. a. Received $100,000 cash from the sale of stock. b. Purchased $20,000 of inventory from J&J Wholesale Company. c. Purchased $30,000 of kitchen eq
> Refer to the information for Sparrow Company. Required: Prepare a classified balance sheet for Sparrow at December 31, 2019. Use the following information for Cornerstone Exercises 3-24 through 3-27: Sparrow Company had the following adjusted trial
> Refer to the information for Sparrow Company. Required: Prepare a retained earnings statement for Sparrow for 2019. Use the following information for Cornerstone Exercises 3-24 through 3-27: Sparrow Company had the following adjusted trial balance a
> Refer to the information for Sparrow Company. Required: Prepare a single-step income statement for Sparrow for 2019. Use the following information for Cornerstone Exercises 3-24 through 3-27: Sparrow Company had the following adjusted trial balance
> When adjusting entries were made at the end of the year, the accountant for Parker Company did not make the following adjustments. a. Wages of $2,900 had been earned by employees but were unpaid. b. $3,750 of performance obligations had been satisfied bu
> LaGarde Company has a machine that it purchased for $125,000 on January 1. Annual depreciation on the machine is estimated to be $14,500. Required: 1. Prepare the adjusting entry needed at the end of the year. 2. What is the book value of themachine rep
> Pain-Free Dental Group Inc. purchased dental supplies of $18,200 during the year. At the end of the year, a physical count of supplies showed $4,125 of supplies on hand. Required: 1. Prepare the adjusting entry needed at the end of the year. 2. What is
> Best Company had the following items that require adjustment at year end. a. Cash for equipment rental in the amount of $3,800 was paid in advance. The $3,800 was debited to prepaid rent when paid. At year end, $2,950 of the prepaid rent had expired. b.
> Olney Cleaning Company had the following items that require adjustment at year end. a. For one cleaning contract, $14,520 cash was received in advance. The cash was credited to Unearned Service Revenue upon receipt. At year end, $1,210 of the service rev
> Manning Manufacturing Inc. had the following items that require adjustment at year end. a. Salaries of $5,320 that were earned in December are unrecorded and unpaid. b. Used $1,970 of utilities in December, which are unrecorded and unpaid. c. Interest of
> Powers Rental Service had the following items that require adjustment at year end. a. Earned $9,880 of revenue from the rental of equipment for which the customer had not yet paid. b. Interest of $650 on a note receivable has been earned but not yet rece
> Listed below are the forms of business organization and several related advantages or disadvantages. Form of Business Advantage or Disadvantage Organization 1. Sole proprietorship a. Most complex to organize 2. Partnership b. Owner(s) have p
> Singleton Inc. uses the accrual basis of accounting and had the following transactions during the year. a. Merchandise was sold to customers on credit. b. Purchased equipment to be used in the operation of its business. c. A 2-year insurance contract was
> Speedy Delivery Company provides next-day delivery across the southeastern United States. During May, Speedy incurred $132,600 in fuel costs. Speedy paid $95,450 of the fuel cost in May, with the remainder paid in June. In addition, Speedy paid $15,000 i
> McDonald Music sells used CDs for $4.00 each. During the month of April, McDonald sold 7,650 CDs for cash and 13,220 CDs on credit. McDonald’s cash collections in April included $30,600 for the CDs sold for cash, $12,800 for CDs sold on credit during the
> Refer to the information for Sparrow Company. Required: 1. Prepare the closing entries for Sparrow at December 31, 2019. 2. How does the closing process affect retained earnings? Use the following information for Cornerstone Exercises 3-24 through 3
> Below are the steps of the accounting cycle. Journalize transaction. Analyze transaction. Close the accounts. Prepare financial statements. Adjust the account. Post to the ledger. Prepare a trial balance. Required: List these steps of the accounting
> A classified balance sheet contains the following categories: Current assets Other assets Long-term investments Current liabilities Property, plant, and equipment Long-term liabilities Intangible assets Stockholders’ e
> Refer to the information presented in Brief Exercise 3-33 for Pelton Company. The balance in Retained Earnings of $12,200 represents the balance as of January 1, 2019. Required: Prepare a retained earnings statement for Pelton for 2019.
> The adjusted trial balance of Pelton Company at December 31, 2019, includes the following accounts: Wages Expense, $22,400; Service Revenue, $38,400; Rent Expense, $3,200; Dividends, $4,000; Retained Earnings, $12,200; and Prepaid Rent, $1,000. Required
> Tyndal Company had the following items that required adjustment at December 31, 2019. a. Purchased equipment for $40,000 on January 1, 2019. Tyndal estimates annual depreciation expense to be $3,100. b. Paid $2,400 for a 2-year insurance policy on July 1
> Nichols Company had the following items that required adjustment at December 31, 2019. a. Electricity used during December was estimated to be $320. This amount will be paid in January. b. Owed wages to employees of $3,250 that were earned in December bu
> Listed below are several users of accounting information and decisions that user may make. User of Accounting Decision Information 1. Manager a. Determines whether the company paid the proper amount of taxes. 2. Employee
> Examine the following accounts. a. Prepaid Insurance b. Inventory c. Interest Payable d. Unearned Service Revenue e. Accumulated Depreciation Required: Identify and explain why each account may or may not require adjustment.
> Lauhl Corporation provides janitorial services to several office buildings. During April, Lauhl engaged in the following transactions: a. On April 1, Lauhl received $24,000 from Metro Corporation to provide cleaning services over the next 6 months. b. On
> The following are several transactions for Halpin Advertising Company. a. Purchased $1,000 of supplies. b. Sold $5,000 of advertising services, on account, to customers. c. Used $250 of supplies. d. Collected $3,000 from customers in payment of their acc
> At December 31, 2019, the ledger of Aulani Company includes the following accounts, all having normal balances: Sales Revenue, $59,000; Cost of Goods Sold, $31,000; Retained Earnings, $20,000; Interest Expense, $3,200; Dividends, $5,000; Wages Expense $8
> Mulberry Services sells electronic data processing services to firms too small to own their own computing equipment. Mulberry had the following accounts and account balances as of January 1, 2019: Accounts Payable........................................
> Sweetwater Temporary Clerical Help Service opened for business in June 2019. From the opening until the end of the year, Sweetwater engaged in the activities described below. So that a realistic trial balance can be prepared, the events described below a
> Findlay Testing Inc. provides water testing and maintenance services for owners of hot tubs and swimming pools. During September the following transactions occurred: Sept. 1 Issued common stock for $20,000. 2 Purchased chemical supplies for $1,880 cash.
> Monilast Chemicals engaged in the following transactions during December 2019: Dec. 2 Paid rent on office furniture, $1,200. 3 Borrowed $25,000 on a 9-month, 8% note. 7 Provided services on credit, $42,600. 10 Purchased supplies on credit, $2,850. 13 C
> A list of accounts for Montgomery Inc. appears below. Accounts Payable Accounts Receivable Bonds Payable Building Cash Common Stock Copyright Cost of Goods Sold Depreciation Expense Income Taxes Expense Income Taxes Payable Insurance Expense Interest Exp
> The following T-accounts summarize the operations of Brilliant Minds Inc., a tutoring service, for April 2019. ' 1. Assuming that only one transaction occurred on each day (beginning on April 3) and that no dividends were paid, describe the transaction t
> Parker Company has a balance of $35,000 in retained earnings on January 1. During the year, Parker reported revenues of $82,000 and expenses of $55,000. Parker also paid a dividend of $8,000. Required: What is the amount of retained earnings on December
> Why is there a demand for accounting information? Name five groups that create demand for accounting information about businesses, and describe how each group uses accounting information.
> Several years ago, Mary Emerson founded Emerson Consulting Inc., a consulting business specializing in financial planning for young professionals. The following captions and amounts summarize Emerson Consulting’s balance sheet at Decemb
