CH3

Show your understanding of the steps involved in adjusting entries by placing the following steps in the correct order of preparation.

1.prepare an unadjusted trial balance. 2.journalize and post adjusting entries. 3.prepare an adjusted trial balance. 4.prepare financial statements.

Which of the following describes accrued revenue? (Check all that apply)

Accounts receivable is usually increased when accruing revenues. They refer to earnings which have been earned but not yet billed. They refer to revenues that are earned in a period, but have not been received and are unrecorded. The adjustment causes an increase in an asset account and an increase in a revenue account.

By the end of the accounting period, employees have earned salaries of $500, but they will not be paid until the following pay period. Which of the following is the proper adjusting entry?

Debit Salaries expense for $500.

An advance payment of $1,000 for services was received on December 1 and was recorded as a liability. By the end of the year, $400 had been earned. Demonstrate what the correct adjusting entry should include by choosing the correct statement below.

Debit Unearned revenues for $400.

Chimney Sweeps provided chimney cleaning services to several clients during the month of February. Chimney's customers have not yet been billed. Chimney's customers owe $2,000 to Chimney. How will Chimney Sweeps record this transaction?

Debit accounts receivable and credit services revenue

Sheldon Company had $500 for one day of accrued salaries on December 31 of the prior year. On January 4 of the current year, total salaries for the five-day week are paid. The journal entry to record the payment of salaries on January 4 includes:

Debit to Salaries Payable for $500; Debit to Salaries Expense for $2,000

Determine which of the following transactions may require adjustments. (Check all that apply.)

Equipment was purchased in the middle of the year. Six months of rent were paid in advance. a 24-month insurance policy was prepaid Supplies were purchased at the beginning of the year, but not all were used. An advance payment was received from a customer earlier in the month, but only partially earned by the end of the month.

Define the Salaries payable account by selecting the appropriate statement below.

It reports amounts owed to employees and is a liability.

Select all that apply Which of the following accounts would be considered a prepaid expense or prepaid asset account? (Check all that apply.)

Prepaid rent Prepaid insurance Supplies

Which of the following statements correctly define(s) a profit margin? (

Profit margin is a useful measure of a business's operating results. Profit margin is the ratio of a business's net income to its net sales. Profit margin is also called return on sales.

$1,000 of cash was received in advance of performing services. By the end of the period, $300 had not yet been earned. (The Unearned revenue account was increased at the time of the initial cash receipt.) Demonstrate the required adjusting journal entry by selecting from the choices below. (Check all that apply.)

Unearned revenue would be debited for $700. Service revenue would be credited for $700.

Identify which group of accounts may require adjustments at the end of the accounting period.

Unearned revenue; Supplies; Prepaid rent

Explain what unearned revenues are by choosing the correct statement below.

Unearned revenues refer to cash received in advance of providing a service or product.

Show your understanding of the steps involved in adjusting entries by placing the following steps in the correct order of preparation.

1. Prepare an unadjusted trial balance 2. Journalize and post adjusting entries 3. Prepare an adjusted trial balance 4. Prepare financial statements

What is a plant asset?

A plant asset refers to a long-term tangible asset used to produce and sell products or services.

The Income Summary account can be defined as which of the following? (Check all that apply.)

A temporary account An account used during the closing process An account that contains a credit for the sum of all revenues An account whose balance equals net income or net loss

Which of the statements below is correct regarding the difference between a temporary account and a permanent account?

A temporary account will not appear on a post-closing trial balance.

Describe an unclassified balance sheet.

An unclassified balance sheet is one whose items are broadly grouped into assets, liabilities, and equity.

When does the closing process take place?

At the end of an accounting period

On December 27, a business completed a $400 service that had not yet been billed or recorded as of December 31. Demonstrate the required adjusting entry of the business by completing the following sentence. The required adjusting entry would be to debit the________ account and ___________________( Debit / Credit ) the _________________account

Blank 1: Accounts receivable Blank 2: credit Blank 3: Service revenue

The closing process takes place at the ____ (end/beginning) of an accounting period, after the ____ (adjusted/unadjusted) trail balance is prepared and ________ ( after/before) the financial statements are preparedmiyua

Blank 1: end Blank 2: adjusted Blank 3: after

A company borrowed $10,000 from the bank at 5% interest. The loan has been outstanding for 45 days. Demonstrate the required adjusting entry for this company by completing the following sentence. The required adjusting entry would be to debit the Interest _______________________ (expense/payable/receivable)account and _______________________ (debit/credit)the Interest ____________________ (expense/payable/receivable) account.

Blank 1: expense Blank 2: credit Blank 3: payable

By the end of the accounting period, employees have earned salaries of $650, but they will not be paid until the following pay period. Demonstrate the required adjusting entry by completing the following sentence. The required adjusting entry would be to debit the Salaries XXXXX

Blank 1: expense Blank 2: credit Blank 3: payable

The formula to figure out the profit margin of a company is_________(Net income/Accounts receivable/Net sales) divided by_____________ (Net income/Cash/Net sales).

Blank 1: net income Blank 2: net sales

A post-closing trial balance is a list of_________acconuts and their balances from the _____________________(journal/ledger)after/before) all adjusting/closing) entries have been journalized and posted.

Blank 1: permanent Blank 2: ledger Blank 3: after Blank 4: closing

Accrual basis accounting recognizes XXXX hen earned and records XXXX when XXXX in order to adhere to the matching principle.

Blank 1: revenues Blank 2: expenses Blank 3: incurred

Complete the following statement. The purpose of the closing process is to reset ________(temporary/permanent) account balances to zero and to transfer the changes in all of these accounts to the Retained, ________________(Earnings/Summary/Withdrawal) account.

Blank 1: temporary Blank 2: earnings

Choose the statement below that explains what "closing" means.

Closing means to bring an account balance to zero.

A 12-month insurance policy was purchased on Dec. 1 for $3,600 and the Prepaid insurance account was increased for the payment. Demonstrate the required adjusting journal entry on Dec. 31 by selecting from the choices below.

Insurance expense would be debited for $300. 3600/12 = $300

Which of the following describe the Salaries payable account? (Check all that apply.)

It is a liability account. It is increased with a credit. It reports amounts owed to employees. It is reported on the balance sheet.

Which of the following statements describes the expense recognition (matching) principle? (Check all that apply.)

Matching of expenses with revenues is a major part of the adjusting process. Expenses should be matched in the same accounting period as the revenues that are recognized as a result of those expenses.

A classified balance sheet has several categories for assets and liabilities including: (Check all that apply.)

Noncurrent (long-term) liabilities. Plant assets. Current assets. Long-term investments.

Select the statements below that describe the purpose of a post-closing trial balance. (Check all that apply.)

One purpose is to verify that all temporary accounts have zero balances. One purpose is to verify that total debits equal total credit for permanent accounts.

Identify which of the accounts below would be classified as a current asset. (Check all that apply.)

Prepaid rent Office supplies Cash Accounts receivable

Which of the following accounts is considered a prepaid expense?

Supplier

Current assets are:

cash and other resources that are expected to be sold, collected or used within one year

A 12-month insurance policy was purchased on Dec. 1 for $4,800 and the Prepaid insurance account was initially increased for the payment. The required adjusting journal entry on December 31 includes a: (Check all that apply.)

debit to Insurance expense for $400. credit to Prepaid insurance for $400.

McDarrel's records $500 of accrued salaries on December 31. Three days later, on January 3, total salaries of $4,000 (including the $500 accrued at year end) are paid. Demonstrate the required journal entry on January 3 by selecting from the choices below. (Check all that apply.)

Cash would be credited for $4,000. Salaries expense would be debited for $3,500. Salaries payable will be debited for $500.

A company borrowed $4,000 from the bank at an interest rate of 9%. By the end of the accounting period, the loan had been outstanding for 30 days. Demonstrate the required adjusting entry by choosing the correct statement below.

Debit Interest expense for $30.

For the current year, Bubbles Office Supply had earned $600 of interest on investments. As of December 31, none of this interest had been received or recorded. Demonstrate the required half of the adjusting entry by choosing the correct statement below.

Debit Interest receivable for $600.

Select the statement below that describes a post-closing trial balance.

It is a listing of all permanent accounts and their balances after closing.

Explain what unearned revenues are by selecting the statements below which are correct. (Check all that apply.)

They are also called deferred revenues. They are reported on a balance sheet. They refer to cash received in advance of performing a service or product. They are a liability.

Define the Income Summary account.

It is a temporary account used during the closing process to summarize revenues and expenses.

A plant asset can be defined by which of the following statements? (Check all that apply.)

Its original cost (minus any salvage value) is expensed over its useful life. It has a life within the business greater than one year. It is a tangible long-term asset. It is reported on the balance sheet.

Which of the accounts below would appear in the equity section of a classified balance sheet?

Retained Earnings

Accrued_________Correct Unavailable are earned in a period that are both unrecorded and not yet received in cash.

Revenues

$1,000 of supplies were purchased at the beginning of the month. $300 were used during the month. (The Supplies account was increased at the time of the initial purchase.) Demonstrate the required adjusting journal entry by selecting from the choices below. (Check all that apply.)

Supplies expense would be debited for $300. Supplies would be credited for $300.

$800 of supplies were purchased at the beginning of the month and the Supplies account was increased. As of the end of the period, $200 of supplies still remain. Which of the following is the correct adjusting entry? Multiple choice question.

Supplies expense would be debited for $600.

Which statements below are true regarding permanent and temporary accounts? (Check all that apply.)

Temporary accounts have a balance for one period only. Retained Earnings is a permanent account, but the Dividend is a temporary account. Permanent accounts are reported on the balance sheet. Permanent accounts will appear on a post-closing trial balance. Temporary accounts are reported on the income statement.

Which of the statements below is (are) correct regarding the accounting cycle? (Check all that apply.)

The accounting cycle is a series of steps repeated each reporting period. The accounting cycle contains 10 steps. The accounting cycle refers to steps followed by a company to prepare its financial statements. The cycle contains steps for adjusting and closing accounts

Which of the statements below explains the accounting cycle?

The accounting cycle is repeated each reporting period and refers to the steps taken in preparing financial statements.

What is the difference between an adjusted trial balance and an unadjusted trial balance? (Check all that apply.)

The adjusted trial balance is used to prepare financial statements. The adjusted trial balance generally has more accounts listed than the unadjusted trial balance. The adjusted trial balance is a list of accounts and their balances after adjusting entries have been posted.

Describe the final step in the adjusting process.

The final step is to create an adjusting journal entry to get from step 1 to step 2.

Review the following statements and determine which is (are) correct regarding an adjusted trial balance and how it is used In preparing financial statements. (Check all that apply.)

The income statement is the first financial statement prepared after preparing the adjusted trial balance. The ending Retained Earnings account balance on the balance sheet is transferred from the statement of retained earnings. The adjusted trial balance includes all accounts and balances appearing in financial statements. Financial statements are prepared more easily using the adjusted trial balance than with the general ledger.

Select all that apply Which of the following is (are) true regarding timeliness and the importance of periodic reporting? (Check all that apply.)

The value of information is often linked to its timeliness. Businesses report financial information at regular intervals to ensure timeliness of data. Useful information must reach decision makers frequently and promptly.

Explain your understanding of the closing process by choosing the correct statements below. (Check all that apply.)

retained earnings

The revenue recognition principle states that revenue:

should be recorded when goods or services are provided to customers at an amount expected to be received accrual accounting

Which of the following could be a logical or realistic accounting period for a business that is creating financial statements? (Check all that apply.)

six-month one-year one-month