AC 210 Chapter 4 Learnsmart

The adjusting entry to record amortization causes _______.

Stockholders' equity to decrease and assets to decrease.

The adjusting entry to record revenue for the services for which the seller has performed its obligation but has not yet been billed the customer requires _____.

A debit to Accounts Receivable and credit to Service Revenue.

After posting the adjusting entry to record revenues for which the seller has performed of its obligations but has not yet collected, which account will be increased?

Accounts Receivable

Interest Expense is ____.

Accrued each period the notes payable is unpaid.

Which of the following adjusting entries are recorded with a debit to an expense and a credit to a liability?

Accruing for services received that have not been paid.

The adjusting entry to record the amortization of a long-term asset that lacks physical substance includes a debit to _____ and a credit to ______.

Amortization Expense and Accumulated Amortization

Which two accounts are used to record the adjusting entry for the amortization of long-term assets that lack physical substance?

Amortization Expense and Accumulated Amortization.

Sonic Gateway purchased $1,000 of app software that is estimated to have four years of usefulness. The adjusting entry to record the amortization includes a debit to _____ and a credit to _____.

Amortization Expense; Accumulated Amortization.

The adjusting entry to record depreciation on equipment includes a _____.

Credit to Accumulated Depreciation and debit to Depreciation Expense.

The entry to record income tax accrued, but unpaid, at the end of the accounting period includes both a ____ and a _____.

Credit to Income Tax Payable

Which of the following entries records the adjustment for Income Tax accrued, but not yet paid?

Debit Income Tax Expense and credit Income Tax Payable.

The adjusting entry to record the amount of revenue for which the seller has fulfilled of its obligation to its buyers that had been collected in advance requires a(n) _______ (debit/credit) to Deferred Revenue and a(n) ______ (debit/credit) to Sales Revenue.

Debit, Credit

The adjusting entry to record the amounts of revenue for which the seller has performed its obligation during the accounting period results in a(n) _______ to the Deferred Revenue account.

Decrease

As of December 31, the unadjusted balance in Deferred Revenue contains $5,600 for unredeemed gift cards. An analysis of the monthly sales indicates that $3,200 gift cards were redeemed during the month but not yet recorded. How will these transactions affect the adjustments at the end of the period?

Deferred Revenue needs to be decreased by the amount of gift cards redeemed during the month. Sales Revenue needs to be increased by the amount of gift cards redeemed during the month.

As of December 31, the end of the accounting period, $700 of salaries and wages owed to employees have been incurred but not paid. The employees will be paid on January 5. On December 31, Salaries and Wages Payable will _______ by $700 and Salaries and Wages ______ will increase by $700.

Increase and Expense

The adjusting entry a company would record for the amount of wages incurred but not yet paid will cause which of the following?

Increase liabilities and decrease stockholders' equity

As of December 31 (the end of the accounting period), ABC Company has a profit before tax of $12,000. The company's tax rate is 25%. The adjustment will include a(n) _____ of $_____ to Income Tax Expense.

Increase of $3,000 ($12,000 x 25% or $12,000 x.025.)

The adjusting entry to record interest owed on obligations at the end of the accounting period includes a debit to _____.

Interest Expense and Credit to Interest Payable.

The adjusting entry to record interest owed on obligations at the end of the accounting period includes a debit to _____ and a credit to _____.

Interest Expense and Interest Payable

As of December 31, $2,500 of interest expense has accrued on a $50,000 note payable. The note payable and the accrued interest will become due and payable next year. How will the interest affect the adjustments at the end of the period?

Interest Expense should be increased, because the cost of interest relates to the current period.

______ is defined as the "cost of borrowing money." Since the account represents a cost incurred on borrowed money, it is classified as a(n) ______ account under stockholders' equity.

Interest and expense

Which of the following statements is correct regarding the adjustment to record interest accrued on a note payable?

Interest on the note payable is classified as an expense since it is a cost of borrowing.

Which of the following may require an accrual adjusting entry that is recorded with a debit to an expense and a credit to a liability?

Interest owed on notes payable and utilities to be paid in later accounting period.

Interest incurred, but not yet paid during an accounting period, should be recorded as an expense and a(n) ____.

Liability

After the adjustments have been completed, the adjusted balance in Income Tax Payable represents the amount _________ to the government at the end of the accounting period.

Owed. (An adjusting entry must be recorded for amounts owed for income taxes incurred during the period with a debit to Income Tax Expense and credit to Income Tax Payable.)

Which of the following is incorrect regarding the Income Tax Payable account?

The account represents tax refunds due to the company.

Why is an adjustment necessary for interest accrued on a note payable at the end of the period if the interest will not be paid until the note is due?

The adjustment is needed to accurately portray the interest liability of the company, all amounts owed should be reported on the balance sheet. Even though the interest will not be paid until a future period, the expense was actually incurred during the current accounting period.

Which of the following statements most accurately describes the purposes of the closing entries?

To establish zero balances in the income statement and dividend accounts and to transfer net income and dividends into retained earnings.

What are the effects on the accounting equation from the adjustment for which the seller has satisfied the performance obligation to its buyers during the accounting period that has previously been recorded as a liability?

Total liabilities will decrease and total stockholders' equity will increase.

What are the effects on the accounting equation from the adjustment for salaries and wages incurred, but not yet paid, during the accounting period?

Total liabilities will increase and total stockholders' equity will decrease.

True or False: The balance in the "Interest Expense account and the balance in the "Interest Payable" account may be different after the adjustments are posted.

True (Interest Expense will contain an amount equal to all interest accrued during the accounting period. Interest Payable will only contain the amount of interest expense that has not been paid as of the end of the accounting period.

True or False: Interest expense that has accrued on a note payable will be recorded in the Interest Payable account. When the interest is paid in a future period, the Interest Payable account will be reduced.

True (The entry will include a debit to Interest Expense and, if the interest is not paid, a credit to Interest Payable. When the amount is paid in the future, the Interest Payable account will be reduced.

The adjusting entry to record wages incurred but not yet recorded includes a credit to ____.

Wages Payable

The adjusting entry for income taxes records income tax that is incurred and _____ by the company.

owed

Which of the following statements is correct regarding the adjustment for salaries and wages accrued but not paid at the end of the account period?

Salaries and Wages Expense will increase by the amount of the unpaid salaires and wages.