Financial accounting module 2

On November 1, 2022, Movers, Inc., paid $24,000 for 2 years' rent beginning on November 1. The Prepaid Rent balance at December 31, 2022 equals Blank___

22,000

Which of the following transactions are examples of prepayments that will require an adjustment at the end of the accounting period on December 31?

A company pays for 4 months of advertising in the Wall Street Journal on November 1. A company pays a 6-month insurance premium at the beginning of October.

How do adjustments for accrued expenses affect liabilities and expenses?

Adjustments for accrued expenses increase liabilities and increase expenses.

BLANK revenue arises when a business receives cash in one period, but does not provide all of the related goods or services until a later period.

Deferred

When should supplies be recorded as an expense?

In the period the supplies are used, regardless of when they were purchased

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.

A debit is on the Blank______ side of the account.

Left

On November 1, 2022, Movers, Inc., paid $24,000 for 2 years' rent beginning on November 1 (assume rent is the same amount each month). Movers' year-end financial statements as of December 31, 2022 will show

Prepaid rent of $22,000 Rent expense of $2,000

Which of the following transactions would normally be recorded as an asset when cash is paid? Multiple choice question. Advance

Rent paid in advance

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

allocated to future accounting periods based on the cost of the asset used during the period

On December 27, Milligan Cleaning provided services to a customer. As of December 31, Milligan has not yet collected cash or billed the customer, but expects to receive cash in January. What are the effects of the necessary adjustment on December 31 for cash to be received in the future?

assets increase; revenues increase

A journal provides a

chronological record of all transactions affecting a firm.

The two components of stockholders' equity are

common stock retained earnings

Which of the following are stockholder equity accounts?

common stock retained earnings

In a double-entry accounting system, the BLANK represents the left side of the account

debit

BLANK s an allocation of the cost of buildings, vehicles, and equipment to expense over time as they are used.

depreciation

When a company records an adjustment for services previously recorded as Deferred Revenue, it recognizes which two of the following?

increase in Revenue decrease in Deferred Revenue

The two roles of financial accounting are to: Multiple select question.

measure business activities of the company. communicate information to external parties for decision making purposes.

Adjustments for accrued expenses ensure that liabilities are reported for all amounts Blank______ at the end of the accounting period.

owed

Adam Corporation uses the cash-basis of accounting. Adam Corporation should record expenses when: Multiple choice question.

paid

The purpose of a journal is to

record a chronological listing of every transaction for a company.

After year-end adjustments have been completed, the adjusted balance in the Deferred Revenue account represents: Multiple choice question.

the amount of the sales or services still owed to the customer.

After adjustments have been completed, the adjusted balance in the Deferred Revenue account represents:

the amount of the sales or services to be provided in the future.

An adjusting entry for accrued expenses involves:

debit to an expense credit to a liability

There is a cause-and-effect relationship between revenues and expenses that dictates:

when costs are recognized as expenses in the income statement

Which of the following prepayments requires an adjustment at the end of the accounting period on December 31? Multiple choice question.

On November 1, the company pays rent for the next six months.

True or false: An external transaction is a transaction the firm conducts with a separate economic entity.

True

On November 15, Kelton Corporation received cash for services to be provided in December. After providing the service in December, Kelton will recognize an adjustment that includes a(n)

decrease in liabilities

A prepayment is originally recorded as an asset. An adjusting entry at the end of the accounting period results in a(n) Blank______ in the asset account and a(n) Blank______ in the expense account.

decrease; increase

At the end of the accounting period, Supplies should be Blank______ and Supplies Expense should be Blank______ for the cost of supplies used up during the period.

decreased; increased

The process of allocating the cost of an asset to expense over the useful life of the asset is called

deprecation

If an adjusting entry's credit is to a liability account, then the debit must be to Blank____

expense

An adjustment is necessary to record interest expense at year-end because the interest:

has already been incurred

A primary purpose of adjustments is to record events that

have occurred but that have not yet been recorded.

An adjustment for accrued expenses results in a(n):

incease in expenses increase in liabilities

BLANK expense should be recorded to recognize the cost of using long-lived assets, such as equipment, during the accounting period.

depreciation

Initially a prepayment for items such as rent or insurance are recorded as assets and later are recorded as a(n) BLANK in the period the benefit expires.

expense

Adjustments help to ensure that all Blank______ are recorded in the period in which they are incurred.

expenses

Under cash-basis accounting, (Select all that apply.)

expenses are recorded when cash is paid. revenues are recorded when cash is received.

An BLANK transaction involves an exchange between the company and a separate economic entity. (Enter one word per blank

external

Under the accrual basis of accounting, costs used to generate revenue are recorded as expenses

in the same period as related revenue.

On April 1, Carnegie Fitness collected $2,400 from a customer for a 12-month membership starting on that date. On December 31, Carnegie should:

increase Service Revenue by $1,800

Andy records an adjustment for deferred revenue. Andy should:

increase a revenue account decrease a liability account

Norbert, Incorporated, delivered goods during December. Payment is expected during the first week of January. The related adjustment will

increase assets and increase revenues

On December 29, Larson sold products to a customer. As of December 31, Larson has not yet collected cash or billed the customer, but expects to receive cash in January. What are the effects of the necessary adjustment on December 31 for cash to be received in the future?

increase in Accounts Receivable increase in Sales Revenue

The period-end adjustment for an accrued revenue always results in a(n):

increase in assets increase in revenues

The adjustment for an accrued revenue always results in a(n):

increase in revenues increase in assets

A company owes employees $10,000 for work performed in the previous period. The adjustment for salaries owed but not yet paid includes a(n)

increase in salaries expense

The adjustment for depreciation of long-lived assets has the effect of

increasing expenses