Accounting - Chapter 4

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 statements are true about the closing process?

Permanent accounts are not closed and are reported on the balance sheet. Temporary accounts, which include revenues, expenses, and dividends, are closed into Retained Earnings.

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 an adjusted trial balance. Prepare the financial statements.

Accrual adjustments will increase balance sheet accounts for ___.

amounts of revenue generated and expenses incurred but not yet collected or paid

___ adjustments involve adjusting entries where good/services have been provided to customers or the expense has been incurred, and the cash will be collected or paid in the future.

Accrual

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 yet been paid.

Which of the following statements describes the effect that adjustments may have on liabilities?

Adjustments increase liabilities for the amount of any accrued and unpaid expenses at the end of the period.

The adjusting entry to record depreciation, includes a debit to ___ and a credit to ___.

Depreciation Expense Accumulated Depreciation

Temporary accounts include ___, ___, and ___. These accounts only track the current period's results.

Dividends Expenses Revenues

The adjusting entry to record interest owed on obligation at the end of the accounting period includes a debit to "Interest ___" and a credit to "Interest ___".

Expense Payable

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 ___ will be debited and Salaries and Wages ___ will be credited by $700.

Expenses; Payable

___ expense accumulates or accrues throughout the accounting period on Notes Payable.

Interest

On September 1, Taggert Company paid $1,800 for a 6-month insurance premium beginning September 1. Which of the following statements are correct regarding the accounting for this insurance over the six-month period?

Taggert will debit Prepaid Insurance for $1,800 on Sept. 1. Taggert will credit Prepaid Insurance for $300 on Sept. 30. Taggert will debit Insurance Expense for $300 on Sept. 30.

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

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

Why are adjustments needed at the end of an accounting period?

To ensure revenues and expenses are reported in the proper period.

True or false: Dividends paid are not reported on the Income Statement because they are not classified as expenses.

True

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

credit

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 debit to Income Tax Expense

Gift cards are an example of a transaction in which a company receives payment in advance of fulfilling a sale or performing a service. This type of transaction will result in: 1) an increase to the account called Cash, an asset, and 2) a(n) ___ to the account called ___ ___, a ___.

credit; deferred revenue, liability

The entry to close Service Revenue into Retained Earnings includes a ___.

debit to Service Revenue credit to Retained Earnings

Salaries and Wages Payable is

debited when the wages that were previously recorded are paid

The ___ recognition principle requires an adjustment for salaries and wages expense incurred during the accounting period that will be paid in a future accounting period.

expense

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

owed

Salaries and Wages Payable is recorded for salaries and wages incurred, but not yet ___ to employees, at the end of the accounting period.

paid

After the adjustments have been completed, the adjusted balance in the Interest Expense account represents ___.

total interest that has been paid and/or accrued during the period

The closing entry to Rent Expense requires Rent Expense to be ___ and Retained Earnings to be ___.

credited; debited

The deferral adjustment to record the amount of service revenue collected in advance for which the company has now satisfied the performance obligation includes a ___.

debit to Deferred Revenue credit to Service Revenue