Chapter 3 smartbook 11

A $300,000 building was purchased on December 1. It is estimated that it will have a life of 20 years and zero salvage value. Calculate depreciation expense for the month of December using straight-line depreciation.

$1,250

Which of the following describes accrued revenue?

-Accounts receivable is usually increased when accruing revenues -The adjustment causes an increase in an asset account and an increase in a revenue account -They refer to revenues that are earned in a period, but have not been received and are unrecorded -They refer to earnings which have been earned but not yet billed

Review the following statements and determine which is (are) correct regarding an adjusted trial balance and how it is used in preparing financial statements.

-Financial statements are prepared more easily using the adjusted trial balance than with the general ledger -The ending Retained Earnings account balance on the balance sheet is transferred from thestatement of retained earnings -The income statement is the first financial statement prepared after preparing the adjusted trial balance -The adjusted trial balance includes all accounts and balances appearing in financial statements

Which of the following statements correctly define(s) a profit margin?

-Profit margin is also called return on sales -Profit margin is the ratio of a business's net income to its net sales -Profit margin is a useful measure of a business's operating results

$1,000 of cash was received in advance of performing services. By the end of the period, $300 had not yet been earned. (The Unearned revenue account was increased at the time of the initial cash receipt). Demonstrate the required adjusting journal entry by selecting from the choices below

-Service revenue would be credited for $700 -Unearned revenue would be debited for $700

McDarrel's records $500 of accrued salaries on December 31. Three days later, on January 3, total salaries of $4,000 (including the $500 accrued at the year end) are paid. Demonstrate the required journal entry on January 3 by selecting from the choices below

Cash would be credited for $4,000 Salaries expense would be debited for $3,500 Salaries payable will be debited for $500

Choose the statement below that demonstrates the correct adjusting entry to recognize depreciation expense on a building.

Debit depreciation expense Credit accumulated depreciation

A company borrowed $4,000 from the bank at an interest rate of 9%. By the end of the accounting period, the loan had been outstanding for 30 days. Demonstrate the required adjusting entry by choosing the correct statement below

Debit interest expense for $30

For the current year, Bubbles Office Supply had earned $600 of interest on investments. As of December 31, none of this interest had been received or recorded. Demonstrate the required half of the adjusting entry by choosing the correct statement below

Debit interest receivable for $600

Sheldon company had $500 for one day of accrued salaries on December 31 of the prior year. On January 4 of the current year, total salaries for the five-day week are paid. The journal entry to record the payment of salaries on January 4 includes:

Debit to salaries payable for $500; Debit to salaries expense for $2,000

A depreciation adjustment would include a debit to _______________ (depreciation expense/accumulated depreciation/building) and _____________ (debit/credit) to _______________ (depreciation expense/acculated depreciation/building).

Depreciation Expense Credit Accumulated Depreciation

A 12-month insurance policy was purchased on Dec. 1 for $3,600 and the Prepaid insurance account was increased for the payment. Demonstrate the required adjusting journal entry on Dec. 31.

Insurance expense would be debited for $300

Accrued _______ are earned in a period that are both unrecorded and not yet received in cash.

Revenues

Which of the following accounts is considered a prepaid expense?

Supplies

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

Which of the accounts below are considered accrued expenses?

Wages expense, Interest expense

$21,000 of equipment is purchased on December 1. It is estimated that it will have a life of 5 years and zero salvage value. Calculate depreciation expense as of December 31 of the first year using the straight-line method.

$350

Explain what unearned revnues are by selecting the statements below which are correct.

-They are also called deferred revenues -They refer to cash received in advance of performing a service or product -They are a liability -They are reported on a balance sheet

Explain your understanding of what an accrued expense is by selecting the statements below which are correct.

-They refer to costs that are incurred in a period, but are both unpaid and unrecorded -They are reported on an income statement -Adjustments involve increasing both an expense and a liability account -Examples of accrued expenses are wages expense and interest expense

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:

Debit to insurance expense for $400 Credit to prepaid insurance for $400

$1000 of supplies were purchased at the beginning of the month. $300 were used during the month. (Supplies account was increased at the time of the initial purchase) Demonstrate the required adjusting journal entry

Supplies would be credited for $300 Supplies expense would be debited for $300

An advance payment of $1,000 for services was received on December 1 and was recorded as a liability. By the end of the year, $400 had been earned. Demonstrate what the correct adjusting entry should include.

Debit unearned revenues for $400

For the current year, a business has earned (but not recorded or received) $200 of interest from investments. Demonstrate the required adjusting entry by completing the following sentence. The required adjusting entry would be to debit the _________ (unearned revenue/accounts receivable/cash/interest receivable) account and _______ (debit/credit) the ________ (cash/accounts receivable/interest revenue/interest receivable) account.

Interest receivable Credit Interest revenue

On December 27, a business completed a $400 service that had not yet been billed or recorded as of December 31. Demonstrate the required adjusting entry of the business by completing the following sentence. The required adjusting entry would be to debit the ___________ (Unearned revenue/Accounts receivable/Cash/Service revnue) account and ___________ (debit/credit) the _________________ (Unearned recenue/Accounts receivable/Cash/Service recenue) account.

Accounts receivable Credit Service revenue