BAD 1 CHAPTER 4

permanent account

(real account) the balance sheet accounts that carry their ending balances into the next accounting period

Bristol, Inc. paid $800 for a 4-month insurance policy on August 1 of the current year. On August 31, Bristol, Inc. made an adjusting entry to account for the insurance that expired during the month of August. The adjusting entry contained a debit to Insurance Expense in the amount of $200Blank 1Blank 1 200 , Correct Unavailable and a credit to Prepaid Insurance in the amount of $200Blank 2Blank 2 200 , Correct Unavailable. The remaining balance in the Prepaid Insurance account after the adjustment was $600Blank 3Blank 3 600 , Correct Unavailable.

200 200 600

Which of the following entries records the adjustment for interest earned on an investment, but not yet collected?

Debit Interest Receivable and credit Investment Income

Deferred Revenue

Previously recorded liabilities that were created when cash received in advance from a customer for products or services to be provided in the future

After adjusting entries have been recorded, select which statements are true regarding supplies.

Supplies on the balance sheet reports the amount of supplies on hand at the end of the accounting period. Supplies expense on the income statement reports the amount of supplies used during the accounting period. **Supplies expense is on the income statement, not the balance sheet and reports the amount used during the period. Supplies, an asset, is on the balance sheet and reports the amount left to use in the future.

On September 1, Taggert Company paid $1,800 for a 6-month insurance premium beginning September 1. Which of the following statements are correct regarding the accounting for this insurance over the six-month period? (Check all that apply.) Multiple select question.

Taggert will debit Insurance Expense for $300 on Sept. 30. Taggert will credit Prepaid Insurance for $300 on Sept. 30. Taggert will debit Prepaid Insurance for $1,800 on Sept. 1.

income statement

a financial statement that gives operating results for a specific period

statement of stockholders equity

a financial statement that summarizes the changes in stockholders' equity over an interval of time

balance sheet

a statement of the assets, liabilities, and capital of a business or other organization at a particular point in time, detailing the balance of income and expenditure over the preceding period.

After the adjustments have been recorded, the adjusted balance in the Prepaid Rent account represents the

amount of the prepayment that remains towards future rental periods

contra account

an account that is an offset to, or reduction of, the primary account

Balance Sheet Accounts

are called real accounts

liabilities are reported

at amounts that represent the probable future sacrifices of assets or services owed at the end of the period

Which financial statement reports the amount of prepaid expenses remaining at the end of the accounting period?

balance sheet

Which financial statement reports the amount of supplies on hand at the end of the accounting period?

balance sheet

On November 1, Movers, Inc. paid $24,000 for 2 years' rent beginning on November 1 (assume rent is the same amount each month). The entry to record this transaction requires a ______. (Select all that apply.) Multiple select question.

credit to Cash of $24,000 debit to Prepaid Rent of $24,000

The adjustment for supplies used during the period will result in a debit to the ______ account and a credit to the ______ account. Multiple choice question.

debit to the supplies expense and credit to the supplies expense

The adjusting entry to record the supplies used during the period will result in a(n) ______.

decrease supplies increase supplies expense

Acurred Expenses

expenses that have been incurred but not yet recorded because cash will be paid after the goods or services are used

True or false: When referring to supplies, the term "on hand" refers to supplies that have been used up during the accounting period. True false question.

false: the term on hand refers to the supplies that the company still owns

Assets are recorded at

historical cost, the amount paid to acquire them

deferred expenses

previously recorded assets, such as prepaid rent, supplies, and equipment, that were created when cash was paid in advance and that must be reduced for the amount of expense actually incurred during the period through use of the asset

After the adjustments have been completed, the adjusted balance in the Supplies Expense account represents the cost of supplies

used during the accounting period

Revenue is recorded

when they are earned

On January 1, Squid Roe, Inc. had a supplies balance of $1,500. During the year, it purchased $40,000 of supplies on credit, of which $30,000 was paid. At the end of the year, it had $2,000 of supplies on hand. The amount of Supplies Expense for the year end December 31 equals

39500

On May 1, Buy & Large, Inc. had a supplies balance of $100. During May, it purchased $500 of supplies on credit. At the end of May, there were $200 of supplies on hand. The amount of Supplies Expense for the month of May equals

400

accured revenue

A revenue that has been earned but for which the cash has not yet been collected.

The adjusting entry to record the amount of prepaid insurance used during the period requires a debitBlank 1Blank 1 debit , Correct Unavailable to Insurance Expense and a crBlank 2Blank 2 cr , Correct Unavailable to Prepaid Expenses. (Enter only one word per blank.)

debit, cr

when making deferral adjustments to record the amount used during the period for items such as prepaid insurance or supplies the debit will blank a blank

decrease, asset

Which financial statement reports the amount of supplies used during the accounting period?

income statement

temporary accounts (nominal)

income statement accounts that are closed to retained earnings at the end of the accounting period

Which financial statement reports the amount of prepaid expenses used during the accounting period?

income statment

Expenses are recorded when

incurred to generate revenue

adjusting entries

journal entries recorded to update general ledger accounts at the end of a fiscal period

closing entries

made at the end of the accounting period to transfer balances in temporary accounts to retained earnings and to establish a zero balance in each of the temporary accounts

Earnings Per Share (EPS)

net income/shares outstanding

Total Asset Turnover Ratio

net sales/average total assets