Chapter 4 ACCT

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

false

Which of the following accounts would be listed above Property and equipment (net of accumulated depreciation) on a classified balance sheet? (Check all that apply.)

Cash Accounts Receivable

______ revenues and expenses result because the cash changed hands prior to the revenue being earned or the expense being incurred.

Deferred

Expense should be recorded to recognize the use of and benefit received from long-lived assets, such as equipment, during the accounting period. (Enter one word per blank.)

Depreciation

Which of the following statements is correct?

Financial statements are prepared after adjustments to ensure that all accounts have been brought to their correct balance.

When should supplies be recorded as an expense?

In the period the supplies are used, regardless of when they were purchased

Which of the following transactions constitutes an accrual adjustment involving a revenue account?

Revenue earned, but not yet collected, for interest on a note receivable

Miss Step, the bookkeeper, forgot to record the adjusting entry for supplies used during the period. This will cause which of the following on the balance sheet? (Check all that apply.)

Supplies will be overstated. Retained earnings will be overstated. Current assets will be overstated.

A closing entry includes a ______.

debit to Sales Revenue

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

decreased

When making deferral adjustments to record the amount used during the period for items such as Prepaid Insurance or Supplies, the debit will a(n) account. (Enter one word per blank.)

increase, expense.

Preparing a(n) ________-_______ trial balance is the last step in the accounting cycle. (Enter one word per blank.)

post, closing

Accrual adjustments to record amounts earned but not yet collected include a debit to an asset account and a credit to a(n)___________ account. (Only one word per blank.)

revenue

True or false: After the closing entries have been posted, the new balance in the retained earnings account will equal the retained earnings reported on the balance sheet.

true

If a company determines that it has $1,400 of supplies on hand at the end of the period, which of the following statements is correct? The company ______.

has $1,400 in supplies remaining at the end of the period

If the adjusting entry to record supplies used during the period is not recorded, then ______.

assets and stockholders' equity will be overstated

Place the steps in the adjustment process at the end of the accounting period in the correct order.

1. Prepare an unadjusted trial balance 2. record the adjusting entries in the journal 3. post the adjusting journal entries to the ledger 4. prepare the financial statements 5. record the closing entries 6. post the closing entries

Amounts collected in advance of being earned are recorded as _______. (Select all that apply.)

A liability Deferred Revenue Unearned Revenue

Which of the following are found on the balance sheet? (Select all that apply.)

Accrued expenses payable Supplies Unearned revenue

Deferred revenues: Deferred expenses: Accrued revenues: Accrued expenses:

Adjusted for amounts earned that were collected in advance. Choice, Adjusted for amounts used that were paid for in advance Adjusted for amounts used that were paid for in advance. matches Choice, Adjusted for amounts earned, but not yet collected Adjusted for amounts earned, but not yet collected. matches Choice, Adjusted for amounts incurred, but not yet paid Adjusted for amounts incurred, but not yet paid.

As of December 31, $2,500 of interest expense has accrued on a $50,000 note payable. The note payable and the accrued interest will become due and payable next year. How will the interest affect the adjustments at the end of the period?

Interest Expense should be increased, because the cost of interest relates to the current period.

Which of the following line items appear on a statement of stockholders' equity? (Check all that apply.)

Net income Dividends declared Retained earnings from the prior period Common stock

Chipotle had $10 of supplies at the beginning of the period and purchased $80 of supplies during the period. At the end of the period, it had $5 of supplies on hand. After the adjusting entry has been recorded at the end of this period, the financial statements will reported which of the following? (Select all that apply.)

Supplies of $5 on the balance sheet Supplies expense of $85 on the income statement

Which of the following statements is incorrect regarding the need to make accrual adjustments at the end of the accounting period?

The Cash account should be adjusted for the effects of accrued revenues and expenses during the accounting period.

Which of the following statements is true regarding the post-closing trial balance?

The post-closing trial balance is an internal report prepared as the last step in the accounting cycle.

True or false: Supplies is an asset account because it contains the value of supplies that have not been used, but still remain an economic resource for the company.

True

__________ 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. (Enter one word per blank.)

accrued

The post-closing trial balance checks that total ________ equal total ________ at the end of the period. (Enter only one word per blank.)

debit, credit

During the closing process, the closing entry to reduce the sales revenue normal account balance to zero requires the revenue account be (debited or credited).

debited

Supplies should be ______ and Supplies Expense should be ______ for supplies used during the period.

decreased; increased

Unearned Revenue should be reduced and Revenue increased for the amount of revenue _________ during the period. (Enter only one word per blank.)

earned

The effect of journal entries on each account is summarized in the ______.

general ledger

Entries are first recorded in the general and then summarized in the ledger. (Enter one word per blank.)

journal

Unearned revenue is a(n) ______.

liability

Assets are listed in order of ______ and liabilities are in order of ______ on the balance sheet

liquidity; due dates

Wages Payable is adjusted for wages earned, but not yet __________ to employees, at the end of the accounting period. (enter one word per blank.)

paid

Accounts Receivable should be increased for ______.

revenues earned during the period, but not yet collected

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? (Check all that apply.)

Total stockholders' equity Ending retained earnings Net income

Which of the following transactions constitute an accrual adjustment involving an expense account? (Check all that apply.)

Wages incurred but not yet paid to employees as of the end of the accounting period Taxes incurred but not yet paid to the government as of the end of the accounting period

Adjusting entries include __________adjustments for revenues earned but not yet collected and expenses incurred but not yet paid. They also include ___________adjustments for revenues earned that were collected in advance and expenses incurred that were previously recorded as assets. (Enter one word per blank.)

deferred, accrued

_______ is the process of allocating the cost of buildings, vehicles, and equipment to expense over time as they are used. (Enter one word per blank.)

Depreciation

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

Statement of stockholders' equity Income statement Balance sheet

If there is an error in recording an adjusting entry on the income statement causing Net Income to overstated, then ______. (Check all that apply.)

Total stockholders' equity on the balance sheet will be overstated Retained Earnings on the statement of stockholders' equity will be overstated

Unearned revenue appears on the ______.

balance sheet as a liability

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

Why is an adjustment necessary for interest accrued on a note payable at the end of the period if the interest will not be paid until the note is due? (Check all that apply.)

The adjustment is needed to accurately portray the interest liability of the company, all amounts owed should be reported on the balance sheet. Even though the interest will not be paid until a future period, the expense was actually incurred during the current accounting period.

As of December 31, the unadjusted balance in Unearned Revenue contains $5,600 for unredeemed gift cards. An analysis of the monthly sales indicates that $3,200 worth of gift cards were redeemed during the month but not yet recorded. How will these transactions affect the adjustments at the end of the period? (Check all that apply.)

Unearned Revenue needs to be decreased by the amount of gift cards redeemed during the month. Sales Revenue needs to be increased by the amount of gift cards redeemed during the month.

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

Which of the following depreciate over time and require an adjusting entry at the end of the accounting period? (Check all that apply.)

buildings equipment

Accrual adjustments to record amounts earned but not yet collected include a debit to an asset account and a credit to a(n) ________ account. (Only one word per blank.)

expense

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

false

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

false

When making deferral adjustments to record the amount used during the period for items such as Prepaid Insurance or Supplies, the debit will_________ a(n) __________account. (Enter one word per blank.)

increase, expense

Gift cards are an example of a transaction in which a company receives payment in advance of fulfilling a sale or performing a service. This type of transaction will result in an increase to an asset account and a(n) increase , Correct Unavailable to a(n) increase , Incorrect Unavailable account. (Enter only one word per blank.)

increase, liability

The general journal, also known as the journal, ______. (Check all that apply.)

is where the effects of each transaction is recorded chronologically. does not provide account balances. is where transactions are first recorded.

Property and equipment, net is reported on the balance sheet at the ______.

net book value