HW#4 Weeek #4

In May, Sea the World Cruises, Inc. collected $1,000 cash from a customer for services to be performed in June. Which of the following is true assuming accrual accounting?

$1,000 of revenue should be recorded in June.

On December 1, Lotsa Space Company received $12,000 from a tenant for 4 months' rent in advance. The entry on December 1, includes a ______. (Check all that apply.)

$12,000 debit to Cash $12,000 credit to Unearned Rent Revenue

On November 1, Movers, Inc. paid $24,000 for 2 years' rent beginning on November 1. The Prepaid Rent balance at December 31, 2 months later, equals ______.

$22,000

How does the timing of adjusting entries differ from the accounting for daily transactions?

Adjustments are made at the end of the accounting period because making them on a daily basis would be inefficient.

Sterling Company paid $1,200 for 3 months of rent on April 1 of the current year. On April 30, Sterling Company made an adjusting entry to account for the rent that expired during the month of April. The adjusting entry contained a debit to Rent Expense in the amount of $______ and a credit to Prepaid Rent in the amount of $______. The remaining balance in the Prepaid Rent account after the adjustment was $______.

Blank 1: 400 Blank 2: 400 Blank 3: 800

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

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

False

When should supplies be recorded as an expense?

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

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

Increase;Expense

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

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

On July 1, Squid Roe, Inc., collected cash in advance from a customer in July for services to be performed in July, August and September and recorded a debit to Cash and credit to Unearned Revenue for $3,000. Which of the following is the proper treatment of this event assuming monthly financial statements are prepared?

On July 31, an adjusting entry should be recorded that debits Unearned Revenue and credits Service Revenue for $1,000.

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.)

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

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 Balance sheet 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.

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.

On the balance sheet, accounts receivable represents ______.

amounts not yet collected from customers

Prepaid rent is ______.

an asset and represents rent paid for in advance

Adjusting entries ______. (Check all that apply.)

are needed in order to measure the period's net income or loss update the accounts to their proper balances

Prepaid expenses appear on the ______.

balance sheet as an asset

During the closing process, the closing entries to individual expense accounts will be recorded with a ______ to reduce the account balance to zero.

credit

A closing entry includes a ______.

debit to Sales Revenue

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

earned

Initially a prepayment for items such as rent or insurance are recorded as assets and later are recorded as a(n) in the period the benefit expires. (Enter one word per blank.)

expense

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

net book value

Interest Receivable should be increased for ______.

revenues earned during the period, but not yet collected