The correct order of the following steps of the accounting cycle is
Answer(s): B
The order of the steps in the accounting cycle is identification and measurement of transactions and other events required to be recognized, journalization, posting from the journals to the ledgers, the development of a trial balance, adjustments to produce an adjusted trial balance. statement presentation, closing, taking a postclosing trial balanceoptional), and making reversing entriesoptional).On October 1, year 1, the entity paid us$ 18, 000 to renew its only insurance policy for a 3- year period beginning on that date.this transaction has not ben recorded.salaries and wages of us$1, 700 have been incurred but not paid as of December 31, year1.at December 31, year 1, the balance per bank statement was US$12, 000.outstanding cheaks amounted to US $, 900.interest of US $40 was credited to the entity's account by the bank during December, but has not yet been entered on the books.
What amounts should be retorted for prepaid insurance and insurance expense in the annual financial statements prepared at December 31?
The insurance policy in effect at the beginning of the year expired and was renewed during the year. Hence, the entire US $3, 600 beginning balance in the prepaid insurance account should be expensed. The amount of the prepayment on the new policy to be expensed is US $1, 500 [3 months elapsed x$18, 000 - 36-month duration of the policy)]. The debit balance in prepaid insurance at year-end is therefore US $16, 500$18, 000 - $1, 500), and total insurance expense is US $5, 100$3, 600 + $1.500).
The required adjusting entry at December 31 related to salaries and wages is
Answer(s): C
An expense incurred but not yet paid is an accrued expense. The adjusting entry to record an accrued expense of US $1, 700 for unpaid salaries and wages is to debit an expense account and credit a liability account.
The journal entry required to close the utilities expense account is
All income statement account balances are closed either to a summary accountsuch as income summary or revenue and expense summary) or to retained earnings. The normal balance of an expense account is a debit. Thus, an expense account is credited in a closing entry.
An entity has made all necessary adjusting entries and is now closing its accounts for the period. Dividends of US 1 ...x!.000 were declared and distributed during the year. The entry to close the dividends account would be
Answer(s): A
Assuming an account entitled "dividends" or "dividends declared" is debited when dividends payable is credited on the declaration date, it must be closed at the end of the period. The balance in this account is closed directly to retained earnings. The effect of declaring and paying dividends is to reduce retained earnings, so the entry is a debit to retained earnings and a credit to dividends.
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