Smartbook ch 4

To determine the adjusting entries required, a(n) ______ is prepared.

unadjusted trial balance

Which of the following entries records the adjustment to revenue for which the seller has performed its obligations but has not yet been collected or billed?

Debit Accounts Receivable and credit Sales Revenue

Beauty and the Bistro, Inc. had $500 of Supplies on its balance at the end of its 1st year of business. It purchased $5,000 of supplies during the 2nd year. At the end of the 2nd year, it had $800 of supplies on hand. What is the amount of Supplies Expense on the income statement?

$4,700

Noodlecake previously purchased $800 of supplies and now only has $200 left. What is Supplies Expense equal on its income statement?

$600

What is the effect of the December 31 adjusting entry to record $400 of revenue for which the seller has performed for its customers but not yet collected

Accounts Receivable should be increased by $400 and Sales Revenue should be increased by $400

How does the timing of adjusting entries differ from the accounting for daily transactions

Adjustments are made at the end of the accounting period because making them on a daily basis would be inefficient.

The adjusting entry to record the amortization of a long-term asset that lacks physical substance includes a debit to ________ ________ and a credit to ________ _________.

Blank 1: Amortization Blank 2: Expense or Expenses Blank 3: Accumulated Blank 4: Amortization

Which of the following account balances will typically be reduced as a result of adjusting entries?

Deferred Revenue Prepaid Rent Supplies

Why is the balance in the Depreciation Expense account generally different from the balance in the Accumulated Depreciation account?

Depreciation expense only reflects the current period depreciation. Accumulated Depreciation contains depreciation since the asset was purchased.

Which of the following is closed into Retained Earnings by debiting Retained Earnings?

Dividends

Select the following statements that are correct regarding Dividends?

Dividends are closed into retained earnings by crediting Dividends. Dividends have a normal debit balance. Dividends are closed into retained earnings by debiting Retained Earnings.

Which of the following statements is correct?

Financial statements are prepared after adjustments to ensure that all accounts have been brought to their correct balance.

The adjusting entry to record interest owed on obligations at the end of the accounting period includes a debit to

Interest Expense and credit to Interest Payable

Which of the following accounts found on an unadjusted balance typically require adjusting entries? (Select all that apply.)

Interest Payable Prepaid Rent Supplies

Which of the following account balances will typically be increased as a result of adjusting entries? (Select all that apply.)

Interest Payable Supplies Expense

How does the adjusting entry to record the supplies used during the period affect the financial statements? (Select all that apply.)

Net Income on the income statement will decrease Supplies on the balance sheet will decrease Supplies Expense on the income statement will increase

In its 1st year of business, Daily Grind, Inc. purchased $1,000 of supplies of which it only has $300 left at the end of the period. Which of the following will be found in the year-end financial statements?

Supplies Expense on the income statement of $700 Supplies on the balance sheet of $300

The adjusting entry to record revenue for services the seller has performed but not yet collected requires

a debit to Accounts Receivable and credit to Service Revenue

Without __________ entries, financial statements would present an incomplete and misleading picture of the company's financial position

adjusting

Adjusting entries are important because

adjustments ensure that the balance sheet reports all of the economic resources the company owns and all of the obligations the company owes without them, the financial statements would be misleading.

Closing journal entries are recorded

after the financial statements have been prepared

A prepayment that is originally recorded as an asset will be ______.

allocated to future accounting periods based on the value of the benefit used during the period

A contra-account ______.

has a normal balance opposite of the account it offsets example is Accumulated Depreciation because it has a normal credit balance

After the adjustments have been completed, the Supplies account on the balance sheet represents the cost of supplies

on hand at the end of the accounting period

The adjusting entry to record amortization causes

stockholders' equity to decrease assets to decrease

The Deferred Revenue T-account will show which of the following?

the amounts the seller has fulfilled of its obligations that were collected in advance on the debit side the amounts received in advance that the seller has not yet fulfilled of its obligations on the credit side the normal ending balance on the credit side

After the adjustments have been recorded, Deferred Revenue on the balance sheet reports the amount of

the sales or services still owed to the customer

Accounts Receivable should be increased for

which the seller has performed of its obligations during the period but not yet collected

In its 1st month of business, Brewed Awakenings, Inc. purchased $1,000 of supplies of which it had paid $700 and owes the rest. At the end of the month, it had $400 of supplies available for use. What is the amount of Supplies Expense on the income statement?

$600

Accumulated Depreciation has a normal _____________ balance which indicates that it ___________ Total Assets.

Blank 1: credit or negative Blank 2: decreases, reduces, lowers, offsets, decreased, or decrease

As the balance in the Accumulated Depreciation increases, total assets ____________ because Accumulated Depreciation is a __________-account

Blank 1: decrease, decreases, or decreased Blank 2: contra, contra-asset, or contra asset

Which of the following transactions constitutes an accrual adjustment involving a revenue account?

Interest Revenue on a note receivable

Why is it necessary to make adjustments to revenue accounts at the end of the accounting period?

Deferred Revenue should be reduced for any portion the seller has fulfilled of its obligations during the current period. Revenues the seller has performed of its obligations but not yet billed to Accounts Receivable, should be recorded as a revenue.