Reference no: EM132770058

Questions -

Q1. On December 31, 2021, a company reported pretax income of $120,000 prior to recording the following adjusting entries for:

Depreciation expense: $31,000.

Accrued service revenues: $29,000.

Accrued expenses: $12,000.

Used insurance: $9,000; the insurance was initially recorded as prepaid.

Rent revenue earned: $7,000; the rent was initially prepaid by the tenant and credited to deferred rent revenue.

How much is the company's pretax income after adjusting entries?

$128,000

$104,000.

$113,000.

$106,000.

Q2. What is the effect on the financial statements when a company fails to adjust the deferred revenue account for revenues earned at year-end that were pre-paid?

Revenues are understated and liabilities are understated.

Net income is understated and assets are understated.

Net income is understated and liabilities are overstated.

Revenues are understated and stockholders' equity is overstated.

Q3. Which of the following situation will not likely result in an end of the period adjustment?

Asset purchased in advance of the use of this asset in operations.

A bill is received for expenses for the current month and is due next month.

Cash is received in advance of a delivery of a good or service.

Expenses are incurred and paid for in the current month.