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Chapter 3: Q3-1QS_5 (page 139)

Question: Choose from the following list of terms/phrases to best complete the statements below.
a. Fiscal year d. Accounting period g. Natural business year
b. Timeliness e. Annual financial statements h. Time period assumption
c. Calendar year f. Interim financial statements i. Quarterly statements
1. presumes that an organization’s activities can be divided into specific time periods.
2. Financial reports covering a one-year period are known as .
3. A(n)consists of any 12 consecutive months.
4. A(n)consists of 12 consecutive months ending on December 31.
5. The value of information is often linked to its .

Short Answer

Expert verified

Answer:

Timeliness is the correct option.

Step by step solution

01

Step-by-Step Solution Step 1: Definition of financial statements

The financial statement contains all the records of the activities performed by the company in a year.

02

Value of information

The value of information is directly linked with the timeliness of the data. If the information is not submitted according to the time, then the value of the information will be zero.

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Most popular questions from this chapter

Question: The following three separate situations require adjusting journal entries to prepare financial statements as

of April 30. For each situation, present both:

∙ The April 30 adjusting entry.

∙ The subsequent entry during May to record payment of the accrued expenses.

Entries can draw from the following partial chart of accounts: Cash; Accounts Receivable; Prepaid

Interest; Salaries Payable; Interest Payable; Legal Services Payable; Unearned Revenue; Revenue; Salaries

Expense; Interest Expense; Legal Services Expense; Depreciation Expense.

a. On April 1, the company retained an attorney for a flat monthly fee of \(3,500. Payment for April legal

services was made by the company on May 12.

b. A \)900,000 note payable requires 12% annual interest, or \(9,000, to be paid at the 20th day of each

month. The interest was last paid on April 20, and the next payment is due on May 20. As of April 30,

\)3,000 of interest expense has accrued.

c. Total weekly salaries expense for all employees is $10,000. This amount is paid at the end of the day

on Friday of each five-day workweek. April 30 falls on a Tuesday, which means that the employees

had worked two days since the last payday. The next payday is May 3.

In the blank space beside each numbered balance sheet item, enter the letter of its balance sheet classification. If the item should not appear on the balance sheet, enter a Z in the blank.

A. Current assets

B. Long-term investments

C. Plant assets

D. Intangible assets

E. Current liabilities

F. Long-term liabilities

G. Equity

17. Land (used in operations)

In the blank space beside each numbered balance sheet item, enter the letter of its balance sheet classification. If the item should not appear on the balance sheet, enter a Z in the blank.

A. Current assets E. Current liabilities

B. Long-term investments F. Long-term liabilities

C. Plant assets G. Equity

D. Intangible assets

6. Notes payable (due in 15 years)

Prepare adjusting journal entries for the year ended (date of) December 31, 2017, for each separate situation.

(Entries can draw from the following partial chart of accounts: Cash; Accounts Receivable; Supplies;

Prepaid Insurance; Equipment; Accumulated Depreciation—Equipment; Wages Payable; Unearned Revenue;

Revenue; Wages Expense; Supplies Expense; Insurance Expense; Depreciation Expense—Equipment.)

a. Depreciation on the company’s equipment for 2017 is computed to be \(18,000.

b. The Prepaid Insurance account had a \)6,000 debit balance at December 31, 2017, before adjusting for

the costs of any expired coverage. An analysis of the company’s insurance policies showed that \(1,100

of unexpired insurance coverage remains.

c. The Office Supplies account had a \)700 debit balance on December 31, 2016; and \(3,480 of office

supplies were purchased during the year. The December 31, 2017, physical count showed \)300 of supplies

available.

d. Two-thirds of the work related to \(15,000 of cash received in advance was performed this period.

e. The Prepaid Insurance account had a \)6,800 debit balance at December 31, 2017, before adjusting for the

costs of any expired coverage. An analysis of insurance policies showed that \(5,800 of coverage had expired.

f. Wage expenses of \)3,200 have been incurred but are not paid as of December 31, 2017.

Question: What is a prepaid expense, and where is it reported in the financial statements?

See all solutions

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