The preparation of financial statements includes the following steps

The preparation of financial statements includes the following steps

The preparation of financial statements includes the following steps

  1. Flower Hills, Inc. has prepared a year-end 2021 trial balance. Certain accounts in the trial balance do not reflect all activities that have occurred.

 

Required:

 

Prepare adjusting journal entries, as needed, for the following items.  Write “None” if no adjusting entry is needed.

 

  1. The Supplies account shows a balance of $540, but a count of supplies reveals only $330 on hand.
  2. 2. Flower Hills employees work Monday through Friday, and salaries of $3,600 per week are paid each Friday. Flower Hills’ year-end falls on Tuesday.
  3. 3. On November 1, 2021, Flower Hills borrowed $50,000 from a local Bank and signed a note. The note requires interest to be paid semi-annually on April 30 and October 31 at 12%.
  4. 4. On October 1, 2021, Flower Hills lent $90,000 to another company. A note was signed with principal and 8% interest to be paid on September 30, 2022.
  5. 5. On November 1, 2021, the company paid its landlord $6,000 representing rent for the months of November through January. Rent expense was debited.
  6. 6. On April 1, 2021, the company paid $2,400 for a two-year fire and liability insurance policy and debited prepaid insurance.
  7. 7. On November 1, 2021, the bar area was leased to Jack Donaldson for two years. Flower Hills received $12,000 representing the first six months’ rent and credited rent revenue.
  8. 8. Flower Hills’ depreciable equipment has a cost of $30,000, a five-year life, with a residual value of $3,000. The equipment was purchased in 2020. The straight-line depreciation method is used.

What are the components of financial statements?

 

  1. A list of statements follows:
  2. GAAP states that the two primary qualitative characteristics that make accounting

information useful for decision-making purposes are ____________________ and

____________________.

 

  1. Expensing the purchase of waste paper baskets that have a three-year estimated useful life

at the date of acquisition is a permissible procedure according to the

____________________ constraint.

 

  1. Corporations prepare quarterly financial statements in order to help achieve

____________________, an ingredient of the primary quality of relevance.

 

  1. ____________________ ____________________ is the overall qualitative

characteristic to be used in judging the quality of accounting information.

 

  1. The three components of relevance are ____________________,

____________________, and ____________________ ____________________.

 

Required:

Fill in the words necessary to complete the statements.