Accounting ch3 SB

Which of the statements below is (are) correct regarding the accounting cycle? (Check all that apply.)

- it's a series of steps repeated each reporting period - it contains 10 steps - refers to steps followed by a company to prepare its financial statements - contains steps for adjusting and closing accounts

Which of the statements below describe(s) a temporary account? (Check all that apply.)

-A temporary account is closed at the end of an accounting period. -A temporary account has a balance for only one period.

$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

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

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

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

Explain your understanding of what an accrued expense is by selecting the statements below which are correct. (Check all that apply.)

-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.

Explain your understanding of the closing process by choosing the correct statements below. (Check all that apply.)

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

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

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

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

Choose the statement below that explains what "closing" means.

Closing means to bring an account balance to zero.

On December 28, I. Greasy Catering Company completed $600 of catering services. As of December 31, the customer had not been billed nor had the transaction been recorded. Demonstrate the required adjusting entry by choosing the correct statement below.

Debit Accounts receivable for $600.

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.

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 what the correct adjusting entry should include by choosing the correct statement below.

Debit Unearned revenues for $400.

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

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

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

Determine which of the following transactions may require adjustments. (Check all that apply.)

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

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.

Expense Credit Payable

Define the Income Summary account.

It is a temporary account used during the closing process to summarize revenues and expenses.

Define the Salaries payable account by selecting the appropriate statement below.

It reports amounts owed to employees and is a liability.

Select the statements below that describe the purpose of a post-closing trial balance. (Check all that apply.)

One purpose is to verify that total debits equal total credit for permanent accounts .One purpose is to verify that all temporary accounts have zero balances.

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

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

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.

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

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

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

Unearned revenue; Supplies; Prepaid rent

Which of the following lists contains only temporary accounts?

Wages Expense; Income Summary; Dividends

Which of the accounts below are considered accrued expenses?

a Wages expense, Interest expense

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

Define "current" as it applies to assets and liabilities on a classified balance sheet

current items are those expected to come due within one year or the company's operating cycle, whichever is longer

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: (Select all that apply).

debit accounts receivable credit services revenue

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

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 balance 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.

retained earnings; dividends

Accrued ____________ , Correct Unavailable are earned in a period that are both unrecorded and not yet received in cash.

revenues

Closing means to transfer account balances from _________ (asset/liability/permanent/temporary) accounts so that they will start with a ____________(contra/larger/zero) balance at the beginning of the next period.

temporary zero