Which is the correct order of the following four steps in the accounting cycle? Step 1 Prepare adjusting journal entriesStep 2 Take a post-closing trial balanceStep 3 Prepare an adjusted trial balanceStep 4 Prepare reversing entries
Answer(s): A
The accounting cycle may be summarized as consisting of nine steps: record the period's transactions in the appropriate journals, post to the ledger(s) from the journals, prepare an unadjusted trial balance, prepare and post adjusting journal entries, prepare an adjusted trial balance, prepare the financial statements, prepare and post the closing entries. take a post-closing trial balance. and prepare reversing entriesoptional). On January 1, a new landscaping firm. Bandit Co. acquired a fleet of vehicles, all the necessary tools and equipment. and a parking and storage facility. It began operations immediately. It is now the end of the first year of operations, and the first set of year-end financial statements are being prepared. Several decisions have to be made regarding the appropriate accounting and reporting practices for this company. Relevant information for several of these items is described in the following list of transactions and events:At year-end. the parking and storage facility that was purchased for US $150, 000 has a fair value of US $250, 000. The physical flow of inventory is first in. first out, and the cost of materials has risen steadily over the year. To promote sales for the coming year. maintenance contracts were sold in December at very reasonable prices, provided that the customers paid cash. On April 1, the company arranged a US $100, 000. 10% bank loan. Interest payments of US $5, 000 are due on October 1 and April 1 of each year during the 5-year term of the loan. During the first year of operations, the company experienced a 5% bad debt rate on credit sales. None of the bad debts are expected to be recovered, given that 5% is the industry average level of bad debts. Total credit sales for the year were US $400, 000. The year-end balance of accounts receivable includes uncollected overdue accounts of US $100, 000. Half of the uncollected overdue amounts are estimated to be uncollectible.
If Bandit Co. reports expenses on an accrual basis, interest expense for the first year of operations is
Answer(s): B
Interest expense for the first year equals the US $5, 000 payment made on October 1 plus the 3 months' accrued interest at year-end, or US $7, 500$5, 000 + $2, 500).
To calculate net sales. List Ac must be , List Be cash receipts from customers.
To convert from the cash basiscash receipts) to the accrual basisnet sales). the increase in net accounts receivable must be added to cash receipts from customers.
Which of the following steps in the accounting cycle is completed later than the others?
The order of the steps in the Denting cycle is identification and measurement of transactions and other events required to be 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 post-closing trial balanceoptional). and making reversing entriesoptional).
A company purchased US $50, 000 worth of office supplies on January 1st and had US $15, 000 of office supplies still on hand at year-end. If the initial purchase of supplies entry on January 1st was to debit office supplies expense and to credit cash for US $50, 000. the adjusting entry on December 31 will be
Because the initial entry recorded the entire purchase to a nominal account. the year-end adjusting entry must debit a prepaid asset to reflect the remaining supplies on hand of US $15.000. The adjusting entry must also creditreduce) expenses for the US $15.000 of supplies that were not used during the period.
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