Accounting Chapter 5 and 6

What type of balance does the account "accumulated depreciation" normally have?

Credit

What would be the end-of-period adjusting entry to show the amount of supplies that have been used up?

Credit- supplies Debit supplies expense

If the beginning balance of the supplies account was $900 and during the month an additional $1500 worth of supplies were purchased, what would be the amount of supplies used up if an inventory showed $600 worth of supplies left over

$1800.00 $1500 + 900= $2400 - 600= $1800

If a plant asset's original cost was $25,000, its salvage value was $4,000, and its useful life is 7 years, what would be the amount of yearly depreciation, using the straight line method of depreciation? _____. What would be the amount of the monthly depreciation?__________

$3000 per yr. $250 per month 25,000- 4000= 21,000 21,000/7 years= 3000 3000/12=$250 (Original cost - salvage value ÷ useful life)

An insurance policy was purchased for $1200, with the term of the policy being 3 months. What would the cost of the expired coverage after the first month?

$400 $1200/3 months=$400.00

Steps in preparing a worksheet

1. Prepare trial balance 2. Prepare the adjustment 3. Prepare adjustment trial balance 4. Extend adjusted balance to income statement 5. Complete worksheet

If a plant asset were given the #178 in the chart of accounts, what would the account number be for "accumulative-plant asset?

178.1

Credit-Supplies Debit- Supplies expense

Adjusting entry of supplies being used up

Contra asset

Allowance of bad debts (allowance for doubtful accounts) is classified as what kind of account?

Owners Equity

Bad debt expense (Uncollectible account expense) is classified ad what kind of account

"Contra Assets" would appear on which financial statement?

Balance Sheet

The original cost of a plant asset minus its accumulated depreciation is called__________ or ________________

Book value or under depreciated cost

"Accumulated depreciation" is classified as an

Contra asset

What would be the end- of- period adjusting entry to show the expired portion of the insurance period?

Credit-Prepay insurance Debit- Insurance expense

What is the end-of-period adjusting entry to show the depreciation of as plant asset?

DR- Depreciation expense CR- Accumulative Depreciation

WHat type of balance does the account "depreciation expense" normally have?

Debit

______ is a method of matching asset's original cost against the revenues produced over its useful life

Depreciation

WHat is the fourth step in the preparation of the worksheet

Extend Adjusted balances to income statement

"Depreciation expense" would appear on which financial statement?

Income statement

What is the only way to affect a change in the ledger accounts relative to adjust entries?

Journalize and post to ledger

Formula for determining yearly depreciation of a plant asset

Original cost - Salvage Value ______________________________ Depreciable cost/Estimated useful life= yearly depreciation

What is the first step in the preparation of the work sheet?

Prepare a trial balance

What is the third steps in the preparation of the worksheet

Prepare the adjusting trial balance

What is the second step in the preparation of the worksheet

Prepare the adjustments

The portion of the original cost of a plant asset that cannot be depreciated is called the _______ or ______ or ____

Salvage Value, scrap value, residual value

Writing the adjustments on the work sheet has no affect on the ledger accounts in the accounting system (T or F)

TRUE

"Depreciation expense" is classified as a

Temporary Owners Equity account

CREDIT- prepay insurance DEBIT- insurance expense

The adjusting entry showing expired portion of insurance premium

Accrual Cash

Under the _____ basis of accounting, revenue is recorded when EARNED, and when expenses are INCURRED. Under the ________ basis of accounting, revenues are recorded when RECEIVED and when expenses are Paid

The period of time that an asset is expected to help produce revenues is called its_____; the length of time that a business is allowed to depreciate a plant asset is called_______

Useful life/ useful life

Credit- Sales Debit- A&R Debit Allowance for bad debt Credit Allowance for doubtful expense

What is the adjusting entry at the end of an accounting period to show that a portion of accounts receivable is being written if as bad debt?

CREDIT accumulated depreciation Debit debit expense

What is the end if the period entry to show depreciation of a plant asset

Debit A&R CREDIT Revenue

When a funeral is sold on account, what is the appropriate journal entry for this transaction

True

Worksheets are not financial statements and are not a formal part of the accounting system

What is the 5th step in the preparation of the worksheet

complete the worksheet

The original cost of a plant asset minus its salvage value=

depreciable cost

Assets of a durable nature that are expected to provide benefits over several years or more are called _________

plant assets

The amount an item can be sold for under normal economic condition is called the ______ value?

salvage

A depreciation method in which the depreciable cost is divided by the estimate of useful life of a plant asset is called the _________ Method?

straight line

A _____ pulls together all of the information needed to enter adjusting entries and prepare financial statements

worksheet