ACC 210 Chapter 3

assets;liabilities

A classified balance sheet shows subtotals for current _________ and current __________.

decrease; increase

A prepayment is originally recorded as an asset. An adjusting entry at the end of the accounting period results in a(n) ______ in the asset account and a(n) ______ in the expense account.

asset

A prepayment such as "Prepaid Insurance" is originally recorded as a(n) ______________ when an insurance policy is purchased and will later be expensed in the period used.

allocated to future accounting periods based on the cost of the asset used during the period

A prepayment that is originally recorded as an asset will be ______.

A primary purpose of adjusting entries is to record events that

A primary purpose of adjusting entries is to record events that

paid

Adam Corporation uses the cash-basis of accounting. Adam Corporation should record expenses when:

end

Adjusting entries are made at the _____ of the accounting period, while daily transactions are made throughout the accounting period.

asset

Adjusting entries ensure that ______ balances are reported at amounts representing the economic benefits that remain at the end of the period. Multiple choice question.

are needed before financial statement preparation. update the accounts to their proper balances.

Adjusting entries:

the amount of the sales or services still owed to the customer.

After the adjusting entries have been completed, the adjusted balance in the Deferred Revenue account represents:

amount of the prepayment that remains towards future rental periods

After the adjusting entries have been completed, the adjusted balance in the Prepaid Rent account represents the ______.

used during the accounting period

After the adjusting entries have been completed, the adjusted balance in the Supplies Expense account represents the cost of supplies:

cost of rent for the accounting period

After the adjusting entries have been completed, the balance in the Rent Expense account represents the:

credit to a liability debit to an expense

An adjusting entry for accrued expenses involves:

has already been incurred

An adjusting entry is necessary to record interest expense at year-end because the interest:

credit a revenue account debit a liability account

Andy records an adjusting entry for deferred revenue. Andy should:

recording of adjusting entries

At year-end, companies that utilize accrual-based accounting systems complete the measurement process through:

liability

Deferred revenue is a(n) ______.

cost

Depreciation is an allocation of the __________ of buildings, vehicles, and equipment to expense over time as they are used.

expense

If an adjusting entry's credit is to a liability account, then the debit must be to ______.

a liability is increasing since cash will be paid in the future due to the expense incurred

In an adjusting entry for expenses incurred but not yet paid ______.

an asset is increased since cash will be collected at a later date

In recording an accrual adjusting entry to account for revenues earned but not yet collected, ______.

expense

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.

asset

Neumann Corporation purchases supplies that will be used during the following quarter. At the time of purchase, the supplies should be recorded as a(n):

Service revenue for $1,800

On April 1, Katie Inc. collected $2,400 from a customer for a 12-month membership starting on that date. On December 31, Katie Inc. should credit:

$35,910

On August 1, 2019, a firm prepaid $53,520 for 2 years' rent of an office building. On March 1, 2020, the firm prepaid $34,800 for 2 years' rent of a warehouse. The rent agreements on both buildings went into effect on the dates the rents were prepaid. What amount will be shown for prepaid rent on the December 31, 2020 balance sheet?

credit to Prepaid Insurance debit to Insurance Expense

On July 1, Book Palace prepaid 12 months' fire insurance with coverage starting the following month. The adjusting entry on December 31 includes:

decreased

Prepaid expenses should be ______ by the cost of the asset used during the accounting period.

balance sheet because it is an asset

Prepaid rent appears in the ______.

increased; decreased

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

asset

Supplies that are not used immediately are recorded as a(n) ______ when purchased

Taggert will credit Prepaid Insurance for $300 on Dec. 31. Taggert will debit Prepaid Insurance for $1,800 on Dec. 1. Taggert will debit Insurance Expense for $300 on Dec. 31.

Taggert Company paid $1,800 for a 6-month insurance premium on December 1. Which of the following statements are correct regarding the accounting for this insurance over the six-month period?

accrual-basis accounting

The accounting basis that records revenues in the period that goods and services are provided to customers is referred to as

expense; asset

The adjusting entry for a prepaid expense includes a debit to a(n) ______ account and a credit to a(n) ____ account.

increase; decrease

The adjusting entry for prepaid rent requires a(n) ______ to Rent Expense and a(n) _______ to Prepaid Rent.

Interest

The expense that relates to a formal note payable and accumulates or accrues throughout the accounting period is referred to as _____________ expense.

depreciation

The process of allocating the cost of an asset to expense over the useful life of the asset is called:

adjusting

To complete the measurement process, companies need to update balances of assets, liabilities, revenues and expenses for changes created by _______ entries

False

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

expenses are recorded when cash is paid. revenues are recorded when cash is received.

Under cash-basis accounting,

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

When should supplies be recorded as an expense?

Statement of stockholders' equity

Which financial statement would report all of the following information: beginning balances for common stock and retained earnings; current period net income or loss; current period dividends; common stock issued during the year; ending balances of common stock and retained earnings?

Interest on the note payable is classified as an expense since it is a cost of borrowing.

Which of the following statements is correct regarding the adjusting entry to record interest accrued on a note payable?

A company pays a 6-month insurance premium at the beginning of October. A company pays for 4 months of advertising in the Wall Street Journal on November 1.

Which of the following transactions are examples of prepayments that will require an adjustment at the end of the accounting period on December 31?

Rent paid in advance

Which of the following transactions would normally be recorded as an asset when cash is paid?

Goods and services provided, not yet collected Expenses incurred, not yet paid

Which of the following would be referred to as "accruals?"

Deferred

________ revenue arises when a business receives cash in one period, but does not provide all of the related goods or services until a later period.

Accrual

___________-basis accounting helps measure and report revenues and expenses in a way that clearly represents the net income of the company.

Accruals

____________ occur when the cash flow occurs after either the expense is incurred or the revenue is earned.

deffered

_____________ revenue arises when a business receives cash in one period, but does not provide all of the related goods or services until a later period.