Ch.4 Accounting

After the adjustments have been completed for the fiscal year, the adjusted balance in the Depreciation Expense account represents the ______.

depreciation for the current fiscal year

Income Tax Expense is a(n) ______.

expense on the income statement and reports the income tax incurred for the period, paid and/or unpaid

Adjustments ensure that ______ balances are reported at amounts representing the economic benefits that remain at the end of the period and will be used-up in future periods.

asset

Adjusting entries never affect the asset account called

cash

In practice, almost every account, except _____, could require an adjusting entry.

cash

The adjustment for supplies used during the period will result in a(n) ______ to the Supplies Expense account.

increase

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 ______.

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

The adjusting entry to record the amount earned that previously had been collected in advance will ______.

decrease liabilities and increase revenues

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

decrease to Supplies and an increase to Supplies Expense

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

decrease to Supplies and an increase to Supplies Expense

In a deferral adjustment for revenues collected in advance that are now earned, the liability recorded when cash was received is ________ by the adjustment for the revenue being earned

decreased

Prepaid expenses, such as Prepaid Rent, should be ______ by the benefits that were used up during the accounting period.

decreased

Permanent accounts are found on ______.

only the balance sheet

If no adjusting entries were recorded for the use of supplies, prepaid expenses and equipment, then assets would be ______.

overstated

Adjustments ensure that liabilities are reported as all amounts ______ at the end of the accounting period.

owed

Select all accounts on an unadjusted trial balance that may require an adjusting entry.

prepaid expenses supplies unearned revenue

Accrual adjustments to record amounts earned but not yet collected include a credit to a(n) _____ account

revenue

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

Income Statement

Identify the impact on the accounting equation of a prepayment of an expense paid in cash.

- Cash decreases - Prepaid expenses, an asset account, increases

Burrows, Inc. borrowed $1,000 on a 12%, 1-year note payable. The amount of interest incurred in one month equals $

10

For a note receivable that was created on November 1, 2018 and is due for repayment on October 31, 2019, what is the time fraction needed to compute interest revenue for the year ended December 31, 2018?

2/12

The annual depreciation taken on a vehicle totals $3,000. The vehicle has been in service for 3 full years and the adjusting entries have been completed for the year. At the end of the 3rd year, the annual financial statements will report Depreciation Expense equal to ___ and Accumulated Depreciation equal to $____

3000, 9000

For the current year ended, Textable, Inc.'s multi-step income statement reports gross profit of $80,000, operating income of $60,000 and a pretax income of $10,000. Textable's income tax rate is 34%. Income Tax Expense for the year equals $

3400

Burrows, Inc. borrowed $10,000 on a 6-month note payable at 6% annually. The amount of interest incurred in one month equals $

50

____adjustments involve adjusting entries where the revenue has been earned or the expense has been incurred, and the cash will be collected or paid in the future.

Accrual

How do accrual adjustments affect liabilities and expenses?

Accrual adjustments can increase liabilities and increase expenses.

On the balance sheet and reports the amount of asset cost used since the asset began to help generate revenue

Accumulated Depreciation

Which of the following adjusting entries will increase Net Income and hence may tempt management to misstate the estimated amount?

Adjusting deferred revenues Adjusting accrued revenues

Which of the following adjusting entries will decrease assets and stockholders' equity?

Adjusting for amounts used that were paid in advance Adjusting for depreciation on equipment

Cash

Adjustment will not affect this account

When are adjusting entries recorded?

At the end of the accounting period prior to preparing the financial statements

Which account would never be affected by an adjusting entry recorded at the end of an accounting period?

Cash

On the income statement and reports the amount of asset cost used during the current accounting period

Depreciation Expense

Accumulated Depreciation

Depreciation expense

True or false: Adjustments ensure that assets on the balance sheet are reported at amounts that have been used up or expired during the period.

False

True or false: Since Retained Earnings is involved in the closing process, it is considered a temporary account.

False

True or false: To calculate a company's income tax obligation, the income after tax is multiplied by the company's tax rate.

False

True or false: The term "defer" means "in advance."

False: to defer

Miss Step, the bookkeeper, forgot to record the adjusting entry for supplies used during the period. This will cause which of the following items on the statement of stockholders' equity to be overstated?

Net income Ending retained earnings Total stockholders' equity

Which balance sheet account would most likely require an adjusting entry to avoid understating liabilities?

Notes Payable

Which type of adjusting entry may management manipulate and overstate the amount to report a higher net income?

Overstating the amount of accrued revenues Overstating the amount earned of deferred revenues

Prepaid expenses

Rent expense

Unearned revenue

Revenue

Adjustments to revenue accounts at the end of the accounting period are made to adhere to accrual accounting principles, specifically the ______ principle.

Revenue recognition

The adjusting entry to record revenues earned, but not yet billed (accrued revenues), affects which of the following financial statements?

Statement of stockholders' equity Balance sheet Income statement

Supplies

Supplies expense

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

Supplies expense on the income statement reports the amount of supplies used during the accounting period. Supplies on the balance sheet reports the amount of supplies on hand at the end of the accounting period.

The 3 variables needed to calculate interest are the ______.

Time period covered in the interest calculation Annual interest rate Principal

What are the effects on the accounting equation from the adjusting entry for interest expense accrued, but not paid, at the end of the accounting period?

Total liabilities will increase and total stockholders' equity will decrease.

What are the effects on the accounting equation from the adjustment for wages incurred, but not yet paid, during the accounting period?

Total liabilities will increase and total stockholders' equity will decrease.

Miss Take, the accountant, forgot to record the interest owed at the end of the accounting period. As a result of this error, ______

stockholders' equity will be overstated liabilities will be understated

Burrows, Inc. borrowed $1,000 on a 3-month note payable and $1,000 on a 6-month note payable both at 12% annually. The amount of interest incurred in one month will be ______.

the same amount for both notes

Which of the following events require adjusting entries?

the use of supplies during the period incurring wages expense that will be paid in the following period the use of equipment during the period owing interest on notes payable

Adjusting entries are typically recorded ______.

to ensure revenues and expenses are recorded in the period in which they occur, even though the cash will be collected or paid in a future period at the end of the accounting period

After the adjustments have been completed, the adjusted balance in the Accumulated Depreciation account represents the ______.

total depreciation taken on the long-lived assets since their purchase

After the adjustments have been completed, the adjusted balance in the Income Tax Expense account represents ______. Multiple choice question.

total income tax that has been paid or accrued during the period

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

used during the accounting period

Accrued expenses payable

utilities expense

Deferring a revenue or expense account in accounting means that the amount ______.

will be reported as a revenue or an expense in a later period