Chapter 3 Smartbook ACCT

When does the closing process take place?

At the end of an accounting period

Current assets are:

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

Place the steps in the adjusting process in the correct order in which they would be performed.

1. Determine what the current account balance is 2. Determine what the correct account balance should be. 3. Record an adjusting entry

Which of the statements below describe(s) a permanent account?

A permanent account is reported on the balance sheet. A permanent account's balance is carried forward to the next accounting period.

Explain a contra account is by choosing the statments below that correctly describe a contra account.

Accumulated Depreciation is an example of a contra account. A contra account has an opposite normal balance than its linked account. A contra account is linked with another account. A contra account would be subtracted from another account.

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

Unearned revenue supplies prepaid rent

The expense recognition (matching) principle aims to record ______ (expenses/assets/liabilities) in the same accounting period as the ______ (expenses/revenues/assets) that are earned as a result of those costs. The principle is a major part of the _____ (timing/adjusting/estimating)

expenses revenues adjusting

The following categories are on a classified balance sheet. List them in the order that they would appear.

1. Current assets 2. Long-term investments 3. Plant assets 4. Intangible assets 5. Current liabilities 6. Long-term liabilities

Choose the statements below which are true regarding adjusting journal entries.

A balance sheet account is always affected cash is never affected An income statement account is always affected

A company had the following selected balances. The first closing journal entry would include which of the following.

A credit to Income Summary for $6000

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

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

What is the book value of an asset?

Book value is the original cost of an asset minus its accumulated depreciation.

Choose the statement below that explains what "closing" means

Closing means to bring an account balance to zero

What are current liabilities?

Current liabilities are reported in the order of those to be settled first. Current liabilities are obligations due to be paid within one year. Current liabilities are usually settled by paying out current asset such as cash.

On december 28, I.M. Greasy, catering completed $600 of catering services. As of december 31, the customer had not been billed nor had the transaction been recorded. What is the required adjusting entry?

Debit Accounts receivable for $600

Which of the following statements are true regarding depreciation?

Depreciation is the original cost of an asset minus any residual value and this amount is expensed over its useful life. Depreciation is recorded through an adjusting entry. Depreciation is recognized at the end of an accounting period. Depreciation is the process of allocating the cost of an asset to the period the asset benefits.

What is depreciation?

Depreciation is the process of allocating the costs of long-term assets over their expected useful life.

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 ______ (expense/payable) account and _____ (debit/credit) the Salaries _____ (expense/payable/unearned) account

Expense Credit Payable

define what the book of value of an asset is by choosing the correct statements below

It is the original cost of an asset minus its accumulated depreciation. The formula is cost less accumulated depreciation IT is sometimes referred to as the net amount of an asset.

Which of the following defines long-term liabilities?

Long-term liabilities are debts of a business that are not due to be settled within one year.

Which of the lists below contains only permanent accounts?

Owner, Capital, Accounts Payable, Accumulated Depreciation

in order to prepare the statement of retained earnings the balance of the ____ (retained earnings/cash) account balance as well as a debit balance in the ___ (dividends/supplies) account is transferred from the adjusted trial balance and is used along with the reported net income (loss) fro the Income Statement.

Retained Earnings Dividends

What is the purpose of the Accumulated Depreciation account?

The account allows both the original cost of plant assets and the total depreciation taken to be shown simultaneously.

Explain what unearned revenues are?

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

A contra account is an account that is linked with another ____ (report/account/statement). It has a(n) ___ (similar/opposite) balance and is _____ (added/subtracted) to/from the other account's balance.

account opposite subtracted

The income summary account is ____ (debited/credited) for the sum of all revenue accounts and is ____ (debited/credited) for the sum of all expense accounts and its balance will be transferred to the ____ (Retained earnings/ cash) account.

credited debited retained earnings

An adjusting journal entry is made at the ____ of an accounting period.

end

a classified balance sheet has several categories for assets and liabilities including

long term investments current assets noncurrent (long-term) liabilities plant assets

in order to prepare an income statement using the account balances on an adjusted trial balance all of the (revenues/liabilities) and their credit balances are transferred to the income statement as well as all of the (expenses/assets) and their (debit/credit) balances.

revenues expenses debit

Which statements below are true regarding permanent and temporary accounts?

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

Which of the following lists contain only temporary accounts?

Wages Expense; income summary; dividends

$21,000 of equipment is purchased on Dec. 1st. It is estimated that it will have a life of 5 years. Calculate depreciation expense as of Dec. 31st of the first year using the straight-line method

$350

List the order in which financial statements are prepared.

1. Income statement 2. Statement of retained earnings 3. Balance Sheet 4. Statement of cash flows

Some of the steps in the accounting cycle are listed below. Place them in correct order of use.

1. Journalize transactions into the journal. 2. Journalize and post the adjusting entries. 3. Prepare the adjusted trial balance. 4. Prepare the adjusted trial balance. 5. Journalize and post closing entries. 6. Prepare post-closing trial balance.

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

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

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

Explain your understanding of the closing process by choosing the correct statements below.

1. The closing process helps to summarize a period's revenues and expenses 2. The closing process resets the balances in temporary accounts to zero

What is a plant asset?

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

Which of the lists below contains only permanent accounts?

Assets Liabilities Common Stock Retained Earnings Accounts Payable Accumulated depreciation

In order to prepare a balance sheet using the account balances on an adjusted trial balance, all of the ____ (expenses/assets) and their debit balances are transferred to the balance sheet as well as all of the ____ (liabilities/revenues) and their ____ (debit/credit) balances.

assets liabilities credit

a depreciation adjustment would include a debit to ____ (depreciation/expense/accumulated depreciation/building) and ____(debit/credit) to _______ (depreciation/expense/accumulated depreciation/building)

depreciation expense credit accumulated depreciation

The required adjusting entry would be to debit the interest ______ account and ____ the interest ____- account

expense credit payable

Accrual basis accounting recognizes ___ (revenues/equity/expenses) when earned and records ___ (revenues/equity/expenses) when ____(incurred/paid) in order to adhere to the matching principle.

revenues expenses incurred