Accounting Chapter 3

A company's accounting records reveal that Supplies had a beginning balance of $1,000. During the accounting period, the company purchased $500 of supplies. A physical count at the end of the accounting period confirmed that $1,400 of supplies were used. What will be the balance of the supplies account on the adjusted trial balance?

$100

Boxer Company purchased store equipment for $12,000 on December 3. The store equipment depreciated $500 in December. The book value of the store equipment on December 31 is

$11,500.

For each of the following errors, considered individually, indicate whether the error would cause the adjusted trial balance totals to be unequal. If the error would cause the adjusted trial balance totals to be unequal, indicate whether the debit or credit total is higher and by how much. a. The adjustment for accrued wages of $5,200 was journalized as a debit to Wages Expense for $5,200 and a credit to Accounts Payable for $5,200.Enter the difference between the debit and credit totals. If the totals are equal, enter a zero. Enter the difference between the debit and credit totals. If the totals are equal, enter a zero. Enter the difference between the debit and credit totals. If the totals are equal, enter a zero.

A. The totals are equal, $0 B. The totals are unequal, credit is higher

At the end of the current year, $17,555 of fees have been earned but have not been billed to clients. Journalize the adjusting entry to record the accrued fees. If an amount box does not require an entry, leave it blank.

Accounts Receivable 17555 | Fees Earned | 17555

Which of the following statements about adjusting entries is NOT true?

Adjusting entries are typically recorded on the last day of the accounting period.

Jefferson Cleaning signed an agreement with Willis Company on December 15 to provide cleaning services every Friday. The services will be billed to Willis Company on the fifteenth of each month at a rate of $15 per hour. As of December 31, Jefferson Cleaning had provided 15 hours of cleaning services to Willis Company. Which of the following is the required adjusting entry that Jefferson Cleaning should make on December 31?

Debit Accounts Receivable, $225; credit Fees Earned, $225

The estimated amount of depreciation on equipment for the current year is $7,700. Journalize the adjusting entry to record the depreciation. If an amount box does not require an entry, leave it blank.

Depreciation Expense 7700 | Accumulated Depreciation-Equipment | 7700

On December 31, Evans Electronics owes $350 of wages to its employees. If the amount for the $350 of wages owed is not recorded, which of the following will occur on Evans's financial statements?

Expenses will be understated and stockholders' equity will be overstated by $350.

In a vertical analysis, which of the following accounts is most likely to represent 100 percent?

Fees Earned

Which of the following businesses would be most likely to use the accrual basis of accounting?

Grocery Store

The prepaid insurance account had a beginning balance of $11,500 and was debited for $18,000 of premiums paid during the year. Journalize the adjusting entry required at the end of the year, assuming the amount of unexpired insurance related to future periods is $13,000. If an amount box does not require an entry, leave it blank.

Insurance Expense 16500 | Prepaid Insurance | 16500

GAAP treats the bonus as a prepaid salary expense which

Is amortized over the life of the contract

Which of the following statements is true about vertical analysis?

It is useful in analyzing relationships within a financial statement.

Which of the following accounts does NOT have a contra asset account associated with it?

Land

If the supplies account is not adjusted, which of the following would occur?

Net income and stockholders' equity would be overstated.

If the adjustment for depreciation is not recorded

Net income is overstated

If the following adjusting entry is omitted, what effect will it have on net income? Depreciation Expense 4,300 | Accumulated Depreciation | 4,300

Net income will be overstated by $4,300.

If depreciation is not adjusted, which of the following would occur?

Net income would be overstated, and expenses would be understated.

Which explains why the adjusting process is necessary?

Ongoing business activity brings changes in account balances that haven't been captured.

Which statement is true regarding the cash basis of accounting?

Revenues are reported in the period in which cash is received, and expenses are reported when cash is paid out.

Prospect Realty Co. pays weekly salaries of $27,600 on Monday for a six-day workweek ending the preceding Saturday. Journalize the necessary adjusting entry at the end of the accounting period, assuming that the period ends on Friday. If an amount box does not require an entry, leave it blank.

Salaries Expense 23000 | Salaries Payable | 23000

When recording the adjusting entry for depreciation expense, the fixed asset account balance

Stays the same

Which of the following would not cause the adjusted trial balance totals to be unequal?

The adjustment for prepaid insurance was omitted.

The following are line items from the vertical analysis of an income statement: Amount Percent Total revenues $600 300% Total expenses 400 200% Net income $200 100% What needs to be changed on the statement?

Total revenues should be the base expressed as 100%.

Which of the following shows the correct order of events?

Unadjusted trial balance, adjusting entries, adjusted trial balance, financial statements

On June 1, 20Y2, Herbal Co. received $18,900 for the rent of land for 12 months. Journalize the adjusting entry required for unearned rent on December 31, 20Y2. If an amount box does not require an entry, leave it blank.

Unearned rent 11025 | Rent Revenue | 11025

Unadjusted trial balance, adjusting entries, adjusted trial balance, financial statements

Vertical anaysis

Prepaid expenses

are an advance payment of cash.

Unearned revenues

are referred to as future revenues.

Adjusting entries are dated

at the end of the accounting period.

The adjusting process is applied at Microsoft

because not all of the revenue from a sale is earned on the date of sale.

GreenSource Company began the period with $330 in supplies. During the month, an additional $1,500 of supplies were purchased. A physical inventory at the end of the period revealed that there were $585 of supplies on hand. The adjusting entry should include a

credit to Supplies for $1,245.

Prior to recording adjusting entries, the office supplies account had a $360 debit balance. A count of the supplies showed $105 of unused supplies remaining. The required adjusting entry is

debit Office Supplies Expense, $255; credit Office Supplies, $255.

Barry Company received $8,000 full payment in advance for services that are 60% complete at the end of the period. The adjusting entry will

debit Unearned Revenue for $4,800 and credit Fees Earned for $4,800.

On December 15, Jay Cleaning Co. agreed to provide Kay Co. with bimonthly cleaning services for its offices. The services will be billed to Kay Co. on the fifteenth of each month at a rate of $400. As of December 31, Jay Cleaning has provided its first cleaning of Kay's offices. The adjusting entry for Jay's Cleaning should include a

debit to Accounts Receivable for $200.

The adjusting entry for accrued revenues includes a

debit to an asset account.

The adjusting entry for accrued revenues

debits an asset account and credits a revenue account.

In the vertical analysis of a balance sheet

each asset item is stated as a percent of total assets.

Because collecting the adjustment data requires time, the adjusting entries are often

entered later but dated as of the last day of the period.

If an accrual is for an expense, the adjusting entry debits an __________ account and credits a(n) __________ account.

expense; liability

If a player is released before his contract is done, the unamortized balance that remains

immediately becomes an expense.

The adjusted trial balance

is prepared on a specific date.

Under the salary cap rules, the signing bonus covers

the length of the player's contract.

Revenue is recorded when services have been performed or products have been delivered to customers. The accounting principle supporting this reporting is

the revenue recognition principle.

What do salary caps used by sports leagues limit?

the total salaries a league can pay each year

The adjusted trial balance is prepared

to verify the equality of total debit and credit balances.

Which of the following represents an accrual?

wages payable