ACCT ch3 Quiz

What is the purpose of the worksheet?

It summarizes data for the preparation of the financial statements.

What is the purpose of the worksheet?

It summarizes data for the preparation of the financial statements. The worksheet does not replace a journal, ledger or financial statements. It summarizes the data for the preparation of the financial statements.

Which of the following is an example of an accrued expense adjusting entry?

Recording the amount of Salaries Expense for employees that is not paid yet.

Which of the following is an example of a deferral (or prepaid) adjusting entry?

Recording the usage of office supplies during the period.

The purpose of adjusting entries is to __________.

Update the account balances at the end of each period to match revenues and expenses to the appropriate period.

On the worksheet, the Service Revenue account has a credit balance of $20,000 on the Unadjusted Trial Balance. In the Adjustments there is a credit of $2,000. What is the amount for Service Revenue in the Adjusted Trial Balance?

$18,000 When you have a debit balance and a debit adjustment, you add the amounts together (15,000 + 3,000 = $18,000) for the Adjusted Trial Balance.

On the worksheet, Accounts Receivable has a debit balance of $15,000 on the Unadjusted Trial Balance. In the Adjustments there is a debit of $3,000. What is the amount for Accounts Receivable in the Adjusted Trial Balance?

$22,000 When you have a credit balance and a credit adjustment, you add the amounts together (20,000 + 2,000 = $22,000) for the Adjusted Trial Balance.

On the worksheet, the Service Revenue account has a credit balance of $20,000 on the Unadjusted Trial Balance. In the Adjustments there is a credit of $2,000. What is the amount for Service Revenue in the Adjusted Trial Balance?

$22,000 When you have a credit balance and a credit adjustment, you add the amounts together (20,000 + 2,000 = $22,000) for the Adjusted Trial Balance.

Thompson Company had $1,000 in office supplies at the beginning of the fiscal year. At the end of the fiscal year, Thompson Company did an inventory of the office supplies and determined that $300 of supplies remained in the supply room unused. What is the amount of Supplies Expense at the end of the fiscal year?

$700

On the worksheet, the Office Supplies account has a debit balance of $9,000 on the Unadjusted Trial Balance. In the Adjustments there is a credit of $2,000. What is the amount for Office Supplies in the Adjusted Trial Balance?

$7000

Jones Company purchased a piece of equipment for $12,000. It has accumulated depreciation at the end of three years of $4,000. What is the book value of the equipment at the end of year 3?

$8000

The adjusted trial balance shows

Account balances after adjustments

When accounts have normal balances, which of the following accounts does not have a debit balance on the Adjusted Trial balance?

Accounts Payable Assets, Expenses, and Drawing would have normal debit balances on the Adjusted Trial Balance. Liabilities, Capital, and Revenues would have normal credit balances on the Adjusted Trial Balance. Accounts Payable is a liability and would have a credit balance, so it is the only account listed that would not have a debit balance.

Software Solutions was hired by Jones Company on December 1 to install and updated software. The total entire amount of $1,800 in revenues is to be paid to us by Jones Company when the job is completed the following January 31. As of December 31, we have completed one half of the software installation and updates. On December 31, Software Solutions makes the following entry to adjust for the revenues earned during December:

Accounts Receivable 900 Debit Service Revenue 900 Only half of the revenue has actually been earned but we do not get any cash payment until it is completed on January 31. To make sure that revenues that have been earned are reflected on the company's current financial statements, we record half of the total ($900) as a debit to Accounts Receivable and a credit to Service Revenue.

Which of the following is true of accrual basis accounting and cash basis accounting?

Accrual accounting records revenue only when it is earned.

A&D Window Cleaning performed $450 of services but has not yet billed customers for the month.If A&D fails to record the adjusting entry, what is the impact on the financial statements?

Balance sheet: assets understated, equity understated Income statement: revenues understated

When accounts have normal balances, which of the following accounts does not have a credit balance on the Adjusted Trial balance?

Cash

When accounts have normal balances, which of the following accounts does not have a debit balance on the Adjusted Trial balance?

Cash Assets, Expenses, and Drawing would have normal debit balances on the Adjusted Trial Balance. Liabilities, Capital, and Revenues would have normal credit balances on the Adjusted Trial Balance. Cash is an asset and would have a debit balance, so it is the only account listed that would not have a credit balance.

Jones Company received $2,200 in cash during March for Service Revenue for a job that will be completed in May. This job would be completed before the end of the year when the finance's are prepared. Since it is short lived and will be earned during this accounting period, Jones Company decided to record it as revenue instead of a liability at the time the cash was received in March. The journal entry to record this transaction when we received the cash in March would be:

Cash 2200 Service Revenue 2200 When receiving cash in advanced for future revenues, but the revenues will be earned within the same accounting period, you can record the transaction as a credit to Service Revenue at the time the cash is received instead of as a liability (unearned).

Jones Company received $2,200 in cash during March for Service Revenue for a job that will be completed in May. This job would be completed before the end of the year when the finance's are prepared. Since it is short lived and will be earned during this accounting period, Jones Company decided to record it as revenue instead of a liability at the time the cash was received in March. The journal entry to record this transaction when we received the cash in March would be:

Cash 2200 Debit Unearned Service Revenue 2200 Credit When receiving cash in advanced for future revenues, but the revenues will be earned within the same accounting period, you can record the transaction as a credit to Service Revenue at the time the cash is received instead of as a liability (unearned).

A piece of equipment purchased cost $10,000 and has depreciation expense of $2,000 for this year. What is the journal entry to record the depreciation expense for the year?

Depreciation Expense - Equipment 2000 Debit, Accumulated Depreciation - Equipment 2000 Credit When journalizing for depreciation, the amount of Depreciation Expense is debited, and Accumulated Depreciation is credited. Depreciation Expense is included on the Income Statement; Accumulated Depreciation will appear as a contra asset on the Balance Sheet.

Interest of $100 is accumulated on a notes payable, although the company will not pay the interest until next year. What is the adjusting journal entry at the end of the year for the accrued interest?

Interest Expense 100 Debit Interest Payable 100 Credit Interest that has been accumulated on a notes payable but not paid yet, needs an adjusting entry to debit Interest Expense (which appears on the income statement) and credit Interest Payable (which appears as a liability on the Balance Sheet).

A worksheet

Is an internal document that helps summarize data for the preparation of financial statements.

If a journal entry and posting for Salaries Expense that incurred during this year but will be paid until next year is accidently omitted, what would be the impact on the financial statements?

Net Income would be overstated (Expenses understated) and Balance Sheet liabilities would be understated By accidently omitting an adjusting entry for salaries incurred but not paid, you would be omitting a debit to Salaries Expense (which if omitted Net Income would be overstated and expenses would be understated) and you would be omitting a credit to Salaries Payable (which if omitted the Balance Sheet liabilities would be understated).

If a journal entry and posting for the use of office supplies during the year is accidently omitted, what would be the impact on the financial statements?

Net Income would be overstated (Expenses understated) and Balance Sheet assets would be overstated. By accidentally omitting an adjusting entry for the use of supplies, you would be omitting a debit to Supplies Expenses (which if omitted Net Income would be overstated and Expenses would be understated) and you would be omitting a credit to Office Supplies (which if omitted the Balance Sheet Assets would be overstated).

If a journal entry and posting for Salaries Expense that incurred during this year but will be paid until next year is accidentally omitted, what would be the impact on the financial statements?

Net Income would be overstated (Expenses understated) and Balance Sheet liabilities would be understated. By accidently omitting an adjusting entry for salaries incurred but not paid, you would be omitting a debit to Salaries Expense (which if omitted Net Income would be overstated and expenses would be understated) and you would be omitting a credit to Salaries Payable (which if omitted the Balance Sheet liabilities would be understated).

Which of the following is an example of an accrued expense adjusting entry?

Recording the amount of Salaries Expense for employees that is not paid yet. Accrued expenses are those expenses that have occurred, but have not been paid or recorded.

The revenue recognition principle requires

Revenue to be recorded only after the business has earned it.

Assume that the weekly payroll of In The Woods Camping Supplies is $300. December 31, end of the year, falls on Tuesday, and In the Woods will pay its employee on Friday for the full week. What adjusting entry will In the Woods make on Tuesday, December 31? (Use five days a full workweek.)

Salaries Expense 120 Debit Salaries Payable 120 Credit

Assume the weekly payroll of the Abbott Company is $5,000. December 31, the end of the year, falls on a Wednesday and Abbott will pay its employee on Friday for the full week. What adjusting entry will Abbott make on Wednesday, December 31 (Use five days as a full work week)?

Salaries Expense 3000 Debit Salaries Payable 3000 Credit

On February 1, Clovis Wilson Law Firm contracted to provide $3000 of legal services for the next three month and received $3000 cash from the client. Assuming Wilson records deferred revenue using the alternative treatment, what would be the adjusting entry recorded on February 28?

Service Revenue 2000 Debit Unearned Revenue 2000 Credit

Uptown Theatre has customers who prepay a total of $1,000 for season tickets to attend five upcoming shows. Uptown Dinner Theatre collects the $1,000 in advance before the shows are performed. After three shows are performed, what should Uptown Theatre report on its income statement assuming it used the accrual basis accounting method?

Service Revenue of $600 Each show earns $200 of Service Revenue ($1,000 / 5 shows = $200 per show). Three shows have been performed so $600 has been earned as Service Revenue ($200 * 3 shows = $600). Therefore, $600 is earned and Service Revenue is on the income statement. Cash is not on the Income Statement, but rather the Balance Sheet. The $1,000 of cash that is received is recorded on the balance sheet as Unearned Service Revenue when received. As the revenue is earned, this account is debited and Service Revenue is credited.

Get Fit Now gains a client who prepays $540 for a package of six physical training sessions. Get Fit Now collect the $540 in advance and will provide the training later. After four training sessions, what should Get Fit Now report on its income statement assuming it uses the accrual basis accounting method?

Service revenue of $360.

Smith Company had $1,200 in office supplies at the beginning of the fiscal year. At the end of the fiscal year, Smith Company did an inventory of the office supplies and determined that $400 of supplies remained in the supply room unused. What is the journal entry to adjust for the use of supplies at the end of the fiscal year?

Supplies Expense 800 Debit Office Supplies 800 Credit. To determine the amount of adjustment, you need to determine the amount of supplies that were used during the period. From the $1,200 worth of supplies at the beginning of the year, subtract the amount of supplies that are still left at the end of the year to get supplies used ($1,200 - $400 = $800 supplies used). Debit Supplies Expense and credit Supplies for this amount.

Jones Company purchased $800 in office supplies with cash this year but it will be used up before the end of the year when the finances are prepared. Since it is short lived and will be used up during this accounting period, Jones Company decided to record it as an expense instead of an asset at the time of purchase. The journal entry to record this transaction when Jones Company buys the office supplies would be:

Supplies Expense 800 Debit, Cash 800 Credit When the purchased office supplies are used within the same accounting period, you can record the transaction as a debit to Supplies Expense at the time the cash is paid for the office supplies instead of as an Asset (Office Supplies).

Adjusting the accounts is the process of

Updating the accounts at the end of the period.