AC 210 Learn Smart Ch 4

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

Amortization Expense, Accumulated Amortization

What is the purpose of the depreciation adjustment for long-lived assets?

Depreciation allows the company to allocate the cost of an asset over the years the asset benefits the company.

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

Which of the following transactions constitutes an accrual adjustment involving a revenue account?

Interest Revenue on a note receivable

How does the adjusting entry to record the supplies used during the period affect the financial statements?

Net Income on the income statement will decrease, Supplies on the balance sheet will decrease, Supplies Expense on the income statement will increase

Why is it necessary to make adjustments to revenue accounts at the end of the accounting period?

Revenues the seller has performed of its obligations but not yet billed to Accounts Receivable, should be recorded as a revenue, Deferred Revenue should be reduced for any portion the seller has fulfilled of its obligations during the current period.

Adjusting entries to adjust Supplies or Prepaid Rent have which of the following effects?

Total expenses on the income statement are increased, The carrying value of the assets are decreased, Total assets is decreased on the balance sheet.

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 had previously been recorded as a liability?

Total liabilities will decrease and total stockholders' equity will increase

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

accured (or owed)

Adjusting entries are required to _____

adjust the unadjusted balances to the desired balances

adjusting entries are important because ____

adjustments ensure that the balance sheet reports all of the economic resources the company owns and all of the obligations the company owes without them, the financial statements would be misleading.

Financial statements are prepared _____ adjustments to ensure that all accounts have been brought to their correct balance.

after

Closing journal entries are recorded ______

after the financial statements have been prepared

A prepayment that is originally recorded as an asset will be _____

allocated to future accounting periods based on the value of the benefit used during the period

After the adjustments have been recorded, the adjusted balance in the Prepaid Rent account represents the _____

amount of the prepayment that remains towards future rental periods

Place the steps in the adjustment process in order.

analyze accounts to determine amount of adjustment, record adjusting entry in journal, summarize adjusting entries in accounts

The adjusting entry to record amortization causes ______

assets to decrease, stockholders' equity to decrease

The adjusted trial balance should be prepared ______ the financial statements are prepared to prove the ______ of the debits and credits.

before; equality

Deferred Revenue is credited when ______

cash is collected in advance of the revenue

The adjusting entry for supplies used during the period requires a ____ to Supplies and a _____ to Supplies expense

credit; debit

The Accounts Receivable account should be _____ when adjusting at the end of the period for any revenues from fulfilling obligations to buyers which has not yet been collected or recorded

debited

The adjusting entry to record the supplies used during the period will result in a(n) _____

decrease to Supplies and an increase to Supplies Expense

As the balance in the Accumulated Depreciation increases, total assets _____ because Accumulated Depreciation is a _____-account.

decrease; contra

Prepaid expenses, such as Prepaid Rent, should be ______ by the benefits that were used up during the accounting period.

decreased

After the adjustments have been completed for the fiscal year, the adjusted balance in the Depreciation Expense account represents the ______

depreciation for the current fiscal year

After the adjustments have been completed, the Supplies account on the balance sheet represents the cost of supplies ______

on hand at the end of accounting period

The Equipment account balance in a company's ledger equals its _____

original cost

Place the steps taken at the end of the accounting period to complete the financial statement preparation process in the correct order.

prepare the adjusting entries, prepare adjusted trial balance, prepare financial statements

Which of the following account balances will typically be increased as a result of adjusting entries?

supplies expense, interest payable

Which of the following accounts found on an unadjusted balance typically require adjusting entries?

supplies, prepaid rent, interest payable

The Deferred Revenue T-account will show which of the following?

the amounts the seller has fulfilled of its obligations that were collected in advance on the debit side, the normal ending balance on the credit side, the amounts received in advance that the seller has not yet fulfilled of its obligations on the credit side

What is a good starting point for determining which accounts require adjustment?

unadjusted trial balance

To determine the adjusting entries required, a(n) ______ is prepared.

unadjusted trial balance (it is the starting point to determine which balances need adjusting)

Why is the balance in the Depreciation Expense account generally different from the balance in the Accumulated Depreciation account?

Depreciation expense only reflects the current period depreciation. Accumulated Depreciation contains depreciation since the asset was purchased.

If an asset account such as Equipment has a normal debit balance, the associated contra-account should have a normal ______ balance.

credit

A contra-account ______

example is Accumulated Depreciation because it has a normal credit balance, has a normal balance opposite of the account it offsets