Accounting 2210 Smart Book Chapter 3

What is a plant asset?

A plant asset refers to a long-term tangible asset used to produce and sell products or services.

A plant asset can be defined by which of the following statements? (Check all that apply.)

Its cost (minus any salvage value) is gradually reported as expenses over its useful life. Provide benefits for greater than one period. It is reported on the balance sheet. It is a tangible long-term asset.

Which of the following statements describes the expense recognition (matching) principle? (Check all that apply.)

Matching of expenses with revenues is a major part of the adjusting process. Expenses should be matched in the same accounting period as the revenues that are earned as a result of those expenses.

Which of the following accounts would be considered a prepaid expense or prepaid asset account? (Check all that apply.)

Prepaid rent Prepaid insurance Supplies

Which of the following accounts is considered a prepaid expense?

Supplies

$800 of supplies were purchased at the beginning of the month and the Supplies account was increased. As of the end of the period, $200 of supplies still remain. Which of the following is the correct adjusting entry?

Supplies expense would be debited for $600.

What is the difference between an adjusted trial balance and an unadjusted trial balance? (Check all that apply.)

The adjusted trial balance generally has more accounts listed than the unadjusted trial balance. The adjusted trial balance is a list of accounts and their balances after adjusting entries have been posted. The adjusted trial balance is used to prepare financial statements.

Explain the difference between the unadjusted and the adjusted trial balance.

The adjusted trial balance is a list of accounts and their balances after adjusting entries have been posted. The adjusted trial balance generally has more accounts listed than the unadjusted trial balance. The adjusted trial balance is used to prepare financial statements.

Identify which group of accounts may require adjustments at the end of the accounting period.

Unearned revenue; Supplies; Prepaid rent

Explain what unearned revenues are by choosing the correct statement below.

Unearned revenues refer to cash received in advance of providing a service or product.

Accrual basis accounting is defined as: (Check all that apply.)

an accounting system that uses the adjusting process to recognize revenues when earned and expenses when incurred.

A 12-month insurance policy was purchased on Dec. 1 for $4,800 and the Prepaid insurance account was initially increased for the payment. The required adjusting journal entry on December 31 includes a: (Check all that apply.)

debit to Insurance expense for $400. credit to Prepaid insurance for $400.