Acc Chapt 3

A $300,000 building was purchased on December 1. It is estimated that it will have a life of 20 years and zero salvage value. Calculate depreciation expense for the month of December using straight-line depreciation.

$1,250

A business has a $10,000 loan from a bank at 8% annual interest. Calculate the amount of interest to accrue if the loan has been outstanding for 45 days. Use a 360 day year.

$100

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

Which of the following describes accrued revenue? (Check all that apply.)

Accounts receivable is usually increased when accruing revenues. The adjustment causes an increase in an asset account and an increase in a revenue account. They refer to earnings which have been earned but not yet billed. They refer to revenues that are earned in a period, but have not been received and are unrecorded.

Demonstrate your knowledge of a depreciation adjusting entry by completing the following sentence. A depreciation adjustment would include a debit to depreciation ____ (expense/accumulated/building) and ____ (debit/credit) to accumulated ____ (depreciation/expense/building).

Blank 1: expense Blank 2: credit Blank 3: depreciation

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 expenseBlank 1Blank 1 expense , Correct Unavailable_ (expense/payable) account and creditBlank 2Blank 2 credit , Correct Unavailable_ (debit/credit) the Salaries payableBlank 3Blank 3 payable , Correct Unavailable_ (expense/payable/unearned) account.

Blank 1: expense or expenses Blank 2: credit Blank 3: payable

A company borrowed $10,000 from the bank at 5% interest. The loan has been outstanding for 45 days. Demonstrate the required adjusting entry for this company by completing the following sentence. The required adjusting entry would be to debit the Interest (expense/payable/receivable) account and (debit/credit) the Interest (expense/payable/receivable) account.

Blank 1: expense or expenses Blank 2: credit or credits Blank 3: payable

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. This principle is a major part of the _____(timing/adjusting/estimating) process.

Blank 1: expenses Blank 2: revenues Blank 3: adjusting

For the current year, a business has earned (but not recorded or received) $200 of interest from investments. Demonstrate the required adjusting entry by completing the following sentence. The required adjusting entry would be to debit the (Unearned revenue/Accounts receivable/Cash/Interest receivable) account and (debit/credit) the (Cash/Accounts receivable/Interest revenue/Interest receivable) account.

Blank 1: interest receivable Blank 2: credit Blank 3: interest revenue

Illustrate your understanding of how to use the adjusted trial balance to prepare a statement of retained earnings by completing the following sentence. In order to prepare the statement of retained earnings, the balance of the (Retained earnings/Cash) account as well as any debit balance in the (Dividends/Supplies) account is transferred from the adjusted trial balance and is used along with the reported net income (loss) from the income statement.

Blank 1: retained earnings Blank 2: dividends

Accrued ____ are earned in a period that are both unrecorded and not yet received in cash

Blank 1: revenue or revenues

Accrued______ are earned in a period that are both unrecorded and not yet received in cash.

Blank 1: revenue or revenues

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

Blank 1: revenues Blank 2: expenses Blank 3: incurred

Choose the statement below that demonstrates the correct adjusting entry to recognize depreciation expense on a building.

Debit Depreciation expense; credit Accumulated depreciation.

A company borrowed $4,000 from the bank at an interest rate of 9%. By the end of the accounting period, the loan had been outstanding for 30 days. Demonstrate the required adjusting entry by choosing the correct statement below.

Debit Interest expense for $30.

Chimney Sweeps provided chimney cleaning services to several clients during the month of February. Chimney's customers have not yet been billed. Chimney's customers owe $2,000 to Chimney. How will Chimney Sweeps record this transaction?

Debit accounts receivable and credit services revenue

A calendar year-end reporting period is defined as a 12-month period which ends on _____ (December/January/March) 31st.

December

Which of the following statements describes the expense recognition (matching) principle? (Check all that apply.)

Expenses should be matched in the same accounting period as the revenues that are recognized as a result of those expenses. Matching of expenses with revenues is a major part of the adjusting process.

What defines a fiscal year for a business?

It is any period which consists of 12 consecutive months.

A plant asset can be defined by which of the following statements? (Check all that apply.)

Its original cost is expensed over its useful life. It is reported on the balance sheet. It is a tangible long-term asset. It has a life within the business more than one year.

$1,000 of cash was received in advance of performing services. By the end of the period, $300 had not yet been earned. (The Unearned revenue account was increased at the time of the initial cash receipt.) Demonstrate the required adjusting journal entry by selecting from the choices below. (Check all that apply.)

Service revenue would be credited for $700. Unearned revenue would be debited for $700

Determine which of the following transactions may require adjustments

Six months of rent were paid in advance. Equipment was purchased in the middle of the year. a 24-month insurance policy was prepaid Supplies were purchased at the beginning of the year, but not all were used. An advance payment was received from a customer earlier in the month, but only partially earned by the end of the month.

Explain the difference between the unadjusted and the adjusted trial balance

The adjusted trial balance is prepared after adjusting entries have been recorded and posted.

Explain the difference between the unadjusted and the adjusted trial balance.

The adjusted trial balance is prepared after adjusting entries have been recorded and posted.

What is the difference between an adjusted trial balance and an unadjusted trial balance? (Check all that apply.)

The adjusted trial balance is used to prepare financial statements. The adjusted trial balance is a list of accounts and their balances after adjusting entries have been posted. The adjusted trial balance generally has more accounts listed than the unadjusted trial balance.

Review the following statements and determine which are correct regarding an adjusted trial balance and how it is used in preparing financial statements. (Check all that apply.)

The income statement is the first financial statement prepared after preparing the adjusted trial balance The ending Retained Earnings account balance on the Balance Sheet is taken from the Statement of Retained Earnings. Financial statements are easier to prepare using the adjusted trial balance than the general ledger.

Explain what unearned revenues are by selecting the statements below which are correct. (Check all that apply.)

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

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

Unearned revenue; Supplies; Prepaid rent

Explain what unearned revenues are by choosing the correct statement below.

Unearned revenues refer to cash received in advance of providing a service or product.

StoryBook Company provided services to several customers during the month of December. These services have not yet been paid by the customers. StoryBook should record the following adjusting entry at the end of December: (Check all that apply.)

credit services revenue debit accounts receivable

The Fish Aquarium obtained funds from a bank and owes interest on a note at the end of the month. The required adjusting journal entry will

debit interest expense and credit interest payable

A 12-month insurance policy was purchased on Dec. 1 for $4,800 and the Prepaid insurance account was initially increased for the payment. The required adjusting journal entry on December 31 includes a: (Check all that apply.)

debit to Insurance expense for $400. credit to Prepaid insurance for $400.

A business has a $5,000 loan from a bank at 16% annual interest. Calculate the amount of interest to accrue if the loan has been outstanding for 90 days. Use a 360 day year.

$200

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

$350

Explain what a contra account is by choosing the statements below that correctly describes a contra account. (Check all that apply.)

A contra account is linked with another 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 would be subtracted from another account.

What is a plant asset?

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

A calendar year-end reporting period is defined as a ____(1 / 3 / 12) -month period which ends on _____(December/January/March) 31st.

Blank 1: 12 Blank 2: December

Explain a contra account by filling in the following blanks. 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.

Blank 1: account Blank 2: opposite Blank 3: subtracted

For the current year, Bubbles Office Supply had earned $600 of interest on investments. As of December 31, none of this interest had been received or recorded. Demonstrate the required half of the adjusting entry by choosing the correct statement below.

Debit Interest receivable for $600.

By the end of the accounting period, employees have earned salaries of $500, but they will not be paid until the following pay period. Which of the following is the proper adjusting entry?

Debit Salaries expense for $500.

An advance payment of $1,000 for services was received on December 1 and was recorded as a liability. By the end of the year, $400 had been earned. Demonstrate the December 31 adjusting entry by choosing the correct statement below.

Debit Unearned revenues for $400.

Able Company owes interest on a note for a loan. The note is dated December 1 and is due on February 1. On December 31, interest expense should be accrued for the following period:

December 1 to December 31

On Jan 1, company purchased equipment that cost $10,000. It is expected to be worth about $1,000 at the end of its useful life in five years.

Depreciation expense - Debit 1,800 Accumulated depreciation - Credit 1,800

A 12-month insurance policy was purchased on Dec. 1 for $3,600 and the Prepaid insurance account was increased for the payment. Demonstrate the required adjusting journal entry on Dec. 31 by selecting from the choices below.

Insurance expense would be debited for $300.

$1,000 of supplies were purchased at the beginning of the month. $300 were used during the month. (The Supplies account was increased at the time of the initial purchase.) Demonstrate the required adjusting journal entry by selecting from the choices below. (Check all that apply.)

Supplies expense would be debited for $300. Supplies would be credited for $300.

$800 of supplies were purchased at the beginning of the month and the Supplies account was increased. As of the end of the period, $200 of supplies still remain. Which of the following is the correct adjusting entry?

Supplies expense would be debited for $600.

Which of the following statements about the Accumulated depreciation account are correct? (Check all that apply.)

The Accumulated depreciation account allows the original cost of the asset to remain in the plant asset account. Accumulated depreciation is subtracted from its plant asset on the balance sheet. Accumulated depreciation accumulates the total depreciation taken on an asset since its purchase. Accumulated depreciation is a contra account.

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 your understanding of what an accrued expense is by selecting the statements below which are correct.

They are reported on an income statement. They refer to costs that are incurred in a period, but are both unpaid and unrecorded. Adjustments involve increasing both an expense and a liability account. Examples of accrued expenses are wages expense and interest expense.

Which of the accounts below are considered accrued expenses?

Wages expense, Interest expense

Accrual basis accounting is defined as: (Check all that apply.)

an accounting system that uses the adjusting process to recognize revenues when earned and expenses when incurred. an accounting system which is consistent with generally accepted accounting principles. an accounting system that uses the matching principle to determine when to recognize revenues and expenses.

The revenue recognition principle states that revenue:

should be recorded when goods or services are provided to customers at an amount expected to be received