|
|
|
Copy of Chap004 1.doc
Copy_of_Chap004_1.doc
Showing 1-2 out of 79
Copy of Chap004 1.doc-Chapter 04 - Adjustments, Fi...
Copy_of_Chap004_1.doc-Chapter 04 - Adjustments, Financial Statements,
Copy of Chap004 1.doc-Chapter 04 - ...
Copy_of_Chap004_1.doc-Chapter 04 - Adjustments, Financial Statements,
Page 1
Chapter 04 - Adjustments, Financial Statements, and the Quality of Earnings
Chapter 04
Adjustments, Financial Statements, and
the Quality of Earnings
ANSWERS TO QUESTIONS
1.
A trial balance is a list of the individual accounts, usually in financial statement
order, with their debit or credit balances.
It is used to provide a check on the
equality of the debits and credits.
2.
Adjusting entries are made at the end of the accounting period to record all
revenues and expenses that have not been recorded but belong in the current
period.
They update the balance sheet and income statement accounts at the end
of the accounting period.
3.
The four different types are adjustments for:
(1)
Deferred revenues -- previously recorded liabilities that need to be adjusted at
the end of the period to reflect revenues that have been earned (e.g.,
Unearned Ticket Revenue must be adjusted for the portion of ticket revenues
earned in the current period).
(2)
Accrued revenues -- revenues that have been earned by the end of the
accounting period but which will be collected in a future accounting period (e.g.,
recording Interest Receivable for interest revenues not yet collected).
(3)
Deferred expenses -- previously recorded assets that need to be adjusted at
the end of the period to reflect incurred expenses (e.g., Prepaid Insurance must
be adjusted for the portion of insurance expense incurred in the current period).
(4)
Accrued expenses -- expenses that have been incurred by the end of the
accounting period but which will be paid in a future accounting period (e.g.,
recording Utilities Payable for utilities expense incurred during the period that
has not yet been paid).
4.
A contra-asset is an account related to an asset that is an offset or reduction to the
asset's balance.
Accumulated Depreciation is a contra-account to the equipment
and buildings accounts.
4-1
Page 2
Chapter 04 - Adjustments, Financial Statements, and the Quality of Earnings
5.
The net income on the income statement is included in determining ending retained
earnings on the statement of stockholders’ equity and the balance sheet.
The
change in the cash account on the balance sheet is analyzed and categorized on
the statement of cash flows into cash from operating activities, investing activities,
and financing activities.
6.
(a)
Income statement: Revenues (and gains) - Expenses (and losses) = Net Income
(b)
Balance sheet:
Assets = Liabilities + Stockholders' Equity
(c)
Statement of cash flows:
Changes in cash for the period = Cash from
Operations +
Cash from Investing Activities +
Cash from Financing Activities
(d)
Statement of stockholders' equity:
Ending Stockholders' Equity = (Beginning
Contributed Capital + Stock Issuances - Stock Repurchases) + (Beginning
Retained Earnings + Net Income - Dividends Declared)
7.
Adjusting entries have no effect on cash.
For deferred revenues and deferred
expenses, cash was received or paid at some point in the past.
For accruals, cash
will be received or paid in a future accounting period.
At the time of the adjusting
entry, there is no cash being received or paid.
8.
Earnings per share = Net income ÷ average number of shares of stock outstanding
during the period.
Earnings per share measures the average amount of net income for the year
attributable to one share of common stock.
9.
Net profit margin = Net income ÷ net sales
The net profit margin measures how much of every sales dollar generated during
the period is profit.
10. An
unadjusted
trial balance is prepared after all current transactions have been
journalized and posted to the ledger.
It does not include the effects of the adjusting
entries.
The basic purpose of an unadjusted trial balance is to check the equalities
of the accounting model (particularly, Debits = Credits) and to provide the data in a
form convenient for further processing in the accounting information processing
cycle.
In contrast, an
adjusted
trial balance is prepared after the effects of all of the
adjusting entries have been applied to the corresponding (prior) unadjusted trial
balance amounts.
The basic purpose of an adjusted trial balance is to insure that
accuracy has been attained in applying the effect of the adjusting entries.
The
adjusted trial balance provides a second check in the model equalities (primarily
Debits = Credits).
It also provides data in a form convenient for further processing.
4-2
Ace your assessments! Get Better Grades
Browse thousands of Study Materials & Solutions from your Favorite Schools
University of Illinois at...
University_of_Illinois_at_Chicago
School:
Financial_Accounting
Course:
Great resource for chem class. Had all the past labs and assignments
Leland P.
Santa Clara University
Introducing Study Plan
Using AI Tools to Help you understand and remember your course concepts better and faster than any other resource.
Find the best videos to learn every concept in that course from Youtube and Tiktok without searching.
Save All Relavent Videos & Materials and access anytime and anywhere
Prepare Smart and Guarantee better grades
Know more
Students also viewed documents
lab 18.docx
lab_18.docx
Course
Course
3
Module5QuizSTA2023.d...
Module5QuizSTA2023.docx.docx
Course
Course
10
Week 7 Test Math302....
Week_7_Test_Math302.docx.docx
Course
Course
30
Chapter 1 Assigment ...
Chapter_1_Assigment_Questions.docx.docx
Course
Course
5
Week 4 tests.docx.do...
Week_4_tests.docx.docx
Course
Course
23
Week 6 tests.docx.do...
Week_6_tests.docx.docx
Course
Course
106
