Ex. 1 Sunkan Company prepares monthly financial statements. Below are listed some selected accounts and their balances on the September 30 trial balance before any adjustments have been made for the month of September.

SUNKAN COMPANY Trial Balance (Selected Accounts) September 30, 2014

Debit Credit Supplies $ 2,700 Prepaid Insurance 4,800 Equipment 16,200 Accumulated DepreciationEquipment $ 1,000 Unearned Rent Revenue 1,200

(Note: Debit column does not equal credit column because this is a partial listing of selected account balances.)

An analysis of the account balances by the company's accountant provided the following additional information: 1. A physical count of office supplies revealed $1,000 on hand on September 30. 2. A two-year life insurance policy was purchased on June 1 for $4,800. 3. Office equipment depreciates $3,000 per year. 4. The amount of rent received in advance that remains unearned at September 30 is $300. Instructions: Using the information given, prepare the adjusting entries that should be made by Sunkan Company on September 30. 222. The following information is from the Income Statement of the Dirt Poor Laundry Service: Revenues Service Revenue $5,500 Expenses Salaries and Wages expense $ 1,950 Advertising expense 500 Rent expense 300 Supplies expense 200 Insurance expense 100 Total expenses 3,050 Net Income $2,450 The entry to close the expense accounts includes a: a. credit to Income Summary for $3,050. b. debit to Income Summary for $3,050. c. debit to Salaries and Wages Expense for $1,950. d. credit to Retained Earnings for $3,050.

2. The periodicity assumption states that: a. a transaction can only affect one period of time. b. estimates should not be made if a transaction affects more than one time period. c. adjustments to the enterprise's accounts can only be made in the time period when the business terminates its operations. d. the economic life of a business can be divided into artificial time periods.

One of the accounting concepts upon which adjustments for prepayments and accruals are based is: a. expense recognition. b. cost. c. monetary unit. d. economic entity.

4 An accounting time period that is one year in length is called: a. a fiscal year. b. an interim period. c. the time period assumption. d. a reporting period.

5. Adjustments would not be necessary if financial statements were prepared to reflect net income from: a. monthly operations. b. fiscal year operations. c. interim operations. d. lifetime operations.

6. Management usually wants ________ financial statements and the IRS requires all businesses to file _________ tax returns. a. annual, annual b. monthly, annual c. quarterly, monthly d. monthly, monthly

7. Expenses are recognized when: a. they contribute to the production of revenue. b. they are paid. c. they are billed by the supplier. d. the invoice is received.

8. Which of the following is not generally an accounting time period? a. A week. b. A month. c. A quarter. d. A year.

9. The revenue recognition principle dictates that revenue should be recognized in the accounting records: a. when cash is received. b. when the performance obligation is satisfied. c. at the end of the month. d. in the period that income taxes are paid.

10. In a service-type business, revenue is recognized: a. at the end of the month. b. at the end of the year. c. when the service is performed. d. when cash is received.

11. The expense recognition principle matches: a. customers with businesses. b. expenses with revenues. c. assets with liabilities. d. creditors with businesses.

12. The following is selected information from L Corporation for the fiscal year ending October 31, 2014.

Cash received from customers $300,000 Revenue earned 390,000 Cash paid for expenses 170,000 Cash paid for computers on November 1, 2013 that will be used for 3 years 48,000 Expenses incurred including any depreciation 216,000 Proceeds from a bank loan, part of which was used to pay for the computers 100,000

Based on the accrual basis of accounting, what is L Corporations net income for the year ending October 31, 2014? a. $204,000 b. $174,000 c. $158,000 d. $220,000