Accounting chapter 3

Recall the column headings of a work sheet used to prepare financial statements. Which of the following items are on a worksheet. (Check all that apply.)

Balance Sheet columns Adjustment columns Adjusted Trial Balance columns Unadjusted Trial Balance columns Income Statement columns

On December 27, a business completed a $400 service that had not yet been billed or recorded as of December 31. Demonstrate the required adjusting entry of the business by completing the following sentence. The required adjusting entry would be to debit the _____ (Unearned revenue/Accounts receivable/Cash/Service revenue) account and _______(debit/credit) the_______ (Unearned revenue/Accounts receivable/Cash/Service revenue) account.

Blank 1: Accounts receivable Blank 2: credit Blank 3: Service revenue

Step 1: Close Income Statement (credit/debit) balance accounts. Step 2: Close Income Statement (credit/debit) balance accounts. Step 3: Close (income summary/dividends) . Step 4: Close (income summary/dividends) .

Blank 1: credit Blank 2: debit Blank 3: income summary Blank 4: dividends

The journal entry to close all of a company's expense accounts would include a (debit/credit) to each of the expense accounts and a corresponding (debit/credit) to the Income (statement/summary) account.

Blank 1: credit Blank 2: debit Blank 3: summary

Define equity by completing the following statement. Equity is the (creditor's/litigator's/owner's) claim on the assets of a business. In a proprietorship, this claim is reported in the (asset/equity/liability) section of a balance sheet in the (Retained earnings/Revenue/Cash) account.

Blank 1: owner's Blank 2: equity Blank 3: Retained earnings

A post-closing trial balance is a list of (permanent/temporary) accounts and their balances from the (journal/ledger) (after/before) all (adjusting/closing) entries have been journalized and posted.

Blank 1: permanent Blank 2: ledger Blank 3: after Blank 4: closing

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.

Blank 1: retained earnings Blank 2: dividends

The following categories are on a classified balance sheet. List them in the order that they would appear.

Current Asset Long-term investment Plant asset Intangible asset Current Liabilities Long term liabilities

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

-Its original cost (minus any salvage value) is gradually expensed over its useful life. -It is reported on the balance sheet. -It is a tangible long-term asset. -Provide benefits for greater than one period. -It has a life within the business greater than one year or the current operating cycle, whichever is longer.

A classified balance sheet has several categories for assets and liabilities including: (Check all that apply.)

-Long-term investments. -Current assets. -Plant assets. -Noncurrent (long-term) liabilities.

A company had the following selected balances: service Revenue $4,000 Rental Revenue $2,000 Wages Expense $500 Utilities Expense $100 Dividends $80 The first closing journal entry would include which of the following?

A credit to Income Summary for $6,000.

Which of the statements below is correct regarding the difference between a temporary account and a permanent account?

A temporary account will not appear on a post-closing trial balance.

Select the statement below that describes a post-closing trial balance.

It is a listing of all permanent accounts and their balances after closing.

What defines a fiscal year for a business?

It is any period which consists of 12 consecutive months.

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

An account used during the closing process 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

Illustrate your understanding of how to use the adjusted trial balance to prepare the balance sheet by completing the following sentence. In order to prepare a balance sheet using the account balances on an adjusted trial balance, all of the ____ (expenses/assets) and their debit balances are transferred to the balance sheet as well as all of the ____ (liabilities/revenues) and their ____ (debit/credit) balances.

Blank 1: assets Blank 2: liabilities Blank 3: credit

The Income Summary account is (debited/credited) for the sum of all revenue accounts and is (debited/credited) for the sum of all expense accounts and its balance will be transferred to the (Retained Earnings/Cash) account.

Blank 1: credited Blank 2: debited Blank 3: retained earnings

What is the book value of an asset?https://outlook.office365.com/mail/inbox

Book value is the original cost of an asset minus its accumulated depreciation.

Which of the following lists of assets would be classified as plant assets?

Buildings, Equipment

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.

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.

account opposite subtracted

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.)

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

Accrual basis accounting recognizes _______ (equity/revenues/expenses) when the service or product is delivered and records _______ (revenues/expenses/liabilities) when _______ (incurred/paid) in order to adhere to the matching

revenues expenses incurred

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

If an adjusting entry for unearned revenue is not recorded, what is the effect on the financial statements?

the revenues on the income statement will be understated.

Current items can be described as those expected to come due within one ________ (month/year) and are listed in the order of how _______ (quickly/slowly) they could be converted to or paid in cash.

year quickly

Place the steps in the adjusting process in the correct order in which they would be performed.

1. determine what the current account balance is 2. determine what the current account balance should be 3. recored an adjusting entry

Some of the steps in the accounting cycle are listed below. Place them in the correct order of use.

1. journalize transactions into the journal 2. journalize and post the adjusting entries 3. prepare the adjusted trial balance 4. prepare the the financial statement 5. journalize and post closing entries 6. prepare post- closing trial balances

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

12 December

Choose the statement(s) below which is (are) true regarding adjusting journal entries. (Check all that apply.)

A balance sheet account is always affected. An income statement account is always affected. Cash is never affected.

What is a plant asset?

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

Which of the following adjustments would be required at the end of the period? (Check all that apply.)

Accrued revenues Deferred expenses Deferred revenues Accrued expenses

Describe an unclassified balance sheet.

An unclassified balance sheet is one whose items are broadly grouped into assets, liabilities, and equity.

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

Closing means to bring an account balance to zero.

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.

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

Debit Depreciation expense; credit Accumulated depreciation.

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.

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 interest ___________ (Cash/Accounts receivable/Interest revenue/Interest receivable) account.

Interest Receivable, Credit, Interest Revenue.

Define the Income Summary account.

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

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.

Identify which of the following steps in the accounting cycle is optional.

Reversing journal entries

Which of the following accounts is considered a prepaid expense?

Supplies

Describe the final step in the adjusting process.

The final step is to create an adjusting journal entry to get from step 1 to step 2.

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

Unearned revenue; Supplies; Prepaid rent

An adjusted trial balance is:

a list of accounts and balances after adjusting entries have been recorded and posted

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

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

revenues

Identify the accounts below that would be classified as current liabilities on a classified balance sheet. (Check all that apply.)

Taxes payable Unearned rent Accounts payable Notes payable (due in three months)

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.

Which of the statements below explains the accounting cycle?

The accounting cycle is repeated each reporting period and refers to the steps taken in preparing financial statements.

Explain how to add adjustments to a work sheet when more than one adjustment is required: (Check all that apply.)

The adjustment can be combined into one adjustment amount. The adjustment can be added to a blank line.

Which of the following statements correctly summarizes how to compute net loss or net income using a work sheet?

The difference between the totals of the debit and credit columns of the Income Statement columns is net income or net loss.

$500 of supplies were purchased at the beginning of the period. By the end of the period, only $100 remains. The adjustment to show the $400 of supplies used would have the following effect(s). (Check all that apply.)

-It would increase expenses, so net income would be reduced. -It would reduce assets, so total assets would be lower.

On December 1, a company pays $3,600 for a 36-month insurance policy. After one month, accrual accounting requires $ _________(100/3,600) of insurance expense be reported on the income statement ending December 31. However, if cash basis accounting is used, $ _______(100/3,600) of insurance expense would be reported at the time of purchase.

100 3.600

Before sorting/transferring amounts to the financial statement columns on a worksheet, the Trial Balance, (Income Statement, Adjustments) and Adjusted Trial Balance columns must (balance, clear).

Blank 1: adjustments Blank 2: balance

Review the following totals from a work sheet. Based on these totals, the company experienced (a) net (income/loss) of $.

Blank 1: loss Blank 2: $2,500, 2500, $2500, or 2,500

The formula to figure out the profit margin of a company is (Net income/Accounts receivable/Net sales) divided by (Net income/Cash/Net sales)

Blank 1: net income Blank 2: net sales

Identify the accounts below that would be classified as long-term liabilities on a classified balance sheet. (Check all that apply.)

Bonds payable (due in five years) Mortgage payable

Identify which of the accounts below would be classified as a current asset. (Check all that apply.)

Cash Prepaid rent Accounts receivable Office supplies

Which of the accounts below would appear in the equity section of a classified balance sheet?

Retained Earnings

Current assets are:

cash and other resources that are expected to be sold, collected or used within one year

How can you add multiple adjustments to one account in a work sheet?

A new line can be added below the affected account in the unadjusted trial balance.

What is a work sheet?

It can help with adjusting and closing accounts and with preparing financial statements.

Cash basis accounting is defined as:

an accounting system which recognizes revenues when cash is received and records expenses when cash is paid

$200 of supplies were purchased at the beginning of the period and recorded as an asset. During the period, $90 of supplies were used. The adjustment to show the supplies used up would cause _______ (assets/liabilities/expenses) to be reduced and _________ (expenses/liabilities/revenues) to be increased, so net income would decline.

assets expenses

Define what the book value of an asset is by choosing the correct statement(s) below. (Check all that apply.)

it is sometimes referred to as the net amount of an asset. The formula is Cost less Accumulated depreciation. It is the original cost of an asset minus its accumulated depreciation.

llustrate 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.

Blank 1: retained earnings Blank 2: dividends

Which of the following statements is (are) correct about completing a work sheet? (Check all that apply.)

If a loss occurs, it is added to the Debit column of the Balance Sheet. Adding net income to the Credit column of the Balance Sheet & Owner's Equity columns implies that it is to be added to Owner, Capital. If a net income occurs, it is added to the Debit column of the Income Statement. If a net income occurs, it is added to the Credit column of the Balance Sheet.

Vito Co. had current assets of $9,000 and current liabilities of $6,000 at the end of the year. Net income during the year was $21,000. The current ratio for the period is:

$9,000 / $6,000 = 1.5 *

Which of the following is (are) true regarding timeliness and the importance of periodic reporting? (Check all that apply.)

- Useful information must reach decision makers frequently. - Businesses report financial information at regular intervals to ensure timeliness of data. - The value of information is often linked to its timeliness.

Rather than debiting an asset account, which of the following statements explains an alternate recording procedure to journalize prepaid expenses, such as prepaid rent or supplies. (Check all that apply.)

Any unused prepaids existing at end of period are transferred to asset accounts. Record all prepaid expenses with debits to expense accounts.

Describe your understanding of the closing process by identifying the correct steps below. (Check all that apply.)

Close all expense accounts. Close all revenue accounts. Close the Income Summary account. Close the Dividends account.

At year-end, ABC Company is beginning its closing process. Use the following account balances to demonstrate the closing of its revenue accounts. (Check all that apply.) Account Debit Credit Service Fees $15,000 Consulting Revenue $12,000 Supplies Expense $900 Rent Expense $600 Dividends $80

Debit to Consulting Revenue for $12,000. Debit Service Fees for $15,000. A credit to Income Summary for $27,000.

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 ____ (expense/payable) account and _____ (debit/credit) the Salaries _____ (expense/payable/unearned) account.

Expense, credit, payable.

Select the statement(s) below which correctly describe how to use the work sheet in the adjustment process. (Check all that apply.)

Information from the Adjustments columns are used for the adjusting journal entries. Journalizing and posting adjusting entries is required after adjustments are entered in a work sheet.

All of the following are on an unclassified balance sheet: (Check all that apply).

Total assets, Total liabilities

Which of the following lists steps of the accounting cycle in the correct order (note that not all steps are listed)?

Trial balance, Adjusting journal entries, Post-closing trial balance.

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

depreciation expense credit accumulated depreciation

A post-closing trial balance is a list of ______ (permanent/temporary) accounts and their balances from the________ (journal/ledger)________(after/before) all____________ (adjusting/closing) entries have been journalized and posted.

permanent ledger after closing

Explain what a contra account is by choosing the statement(s) below that correctly describe(s) a contra account. (Check all that apply.)

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

Which of the following accounts would be considered a prepaid expense or prepaid asset account? (Check all that apply.)

-Prepaid rent -Supplies -Prepaid insurance

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

Match the item on the left with the definition on the right.

Income statement: Reports a business's revenues and expenses for a period of time. Balance sheet: Reports a business's assets, liabilities and equity on a specific date. Work sheet: An internal accounting aid which helps in preparing financial statements. Trial balance: A list of accounts and their balances at a point in time. Statement of cash flows: Reports the inflows and outflows of cash during a period of time.

$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 for one month, as of December 31, of the first year using the straight-line method.

$350

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

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

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

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

Which of the following statements describes why accrual accounting better reflects a business's performance as compared to the cash basis? (Check all that apply.)

-Expenses are always recognized in the period in which they are incurred. -Comparability of financial statements is improved. -Revenues are always recorded in the period in which they are earned when services and products are delivered.

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 earned as a result of those expenses. -Matching of expenses with revenues is a major part of the adjusting process.

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

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

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

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

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

-an accounting system that uses the matching principle to determine when to recognize revenues and expenses. -an accounting system that uses the adjusting process to recognize revenues when earned and expenses when incurred.

A classified balance sheet can be described as a balance sheet that: (Check all that apply.)

-lists current assets in the order of how quickly they can be converted to cash. -is more useful to decision makers. -organizes assets and liabilities into important subgroups.

Which of the following statements is correct regarding a work sheet and the adjustment process?

Adjusting journal entries are prepared from the Adjustments columns of a work sheet.

Cash received from a customer for unearned subscription revenue can initially be recorded as either a(n) (revenue/expense) or a(n) (liability/expense). No matter how an unearned revenue was initially recorded, after the adjusting entry, net income will be identical.

Blank 1: revenue Blank 2: liability

Identify which of the accounts below would be classified as a plant asset account. (Check all that apply.)

Building Land currently being used Machinery Equipment

At year-end, Zagnut Company is beginning its closing process. Use the following account balances to demonstrate the closing of its expense accounts. (Check all that apply.) Account Debit Credit Service Fees $10,000 Consulting Revenue $2,000 Supplies Expense $700 Insurance Expense $900 Dividends $120

Credit to Supplies Expense for $700. A debit to Income Summary for $1,600. Credit Insurance Expense for $900.

Choose the formula below that is used to calculate the current ratio of a business.

Current assets divided by current liabilities

What are current liabilities? (Check all that apply.) Current liabilities are obligations due to be paid within one year. Current liabilities are reported in the order of those to be settled first. Current liabilities are property, plant and equipment that are tangible and depreciated. Current liabilities are obligations that are not due to be settled within one year or the operating cycle, whichever is longer.

Current liabilities are obligations due to be paid within one year. Current liabilities are reported in the order of those to be settled first.

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.

Mouse Inc. uses the alternative method of accounting for prepayments and purchased a $1,200, 6-month insurance policy. The company immediately debited the Insurance expense account. By the end of the period, $400 of the policy had expired. Demonstrate the required adjustment needed at the end of the period.

Debit Prepaid insurance $800.

Mouse Inc. received a $2,500 prepayment of rent from one of its tenants and immediately credited the Rent revenue account. By the end of the period, $500 of the rent had not been earned by Mouse Inc.. Demonstrate the required adjustment needed at the end of the period.

Debit Rent revenue for $500.

On December 31, AB Consulting recorded two days' wages of $100 in an adjusting entry which included a debit to Salaries Expense and a credit to Salaries Payable. On January 1, the accountant prepared a reversing entry which included which of the following?

Debit Salaries Payable $100; credit Salaries Expense $100.

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

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.

Which of the following is correct regarding a work sheet?

Each set of column totals must balance on the Trial Balance columns, Adjustments columns and the Adjusted Trial Balance columns.

An adjusting journal entry is made at the ______ (beginning/middle/end) of an accounting period.

End

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

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

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.

Which of the accounts below would be classified as long-term or fixed assets? (Check all that apply.)

Land Equipment Vehicles Building

Review the following statements and select the ones that are correct regarding sorting accounts from the Adjusted Trial Balance columns of a work sheet to the Income Statement and Balance Sheet columns in order to prepare for our last step of completing the worksheet. (Check all that apply.)

Liabilities go to the Balance Sheet Credit column. Expense accounts go to the Income Statement Debit column. Dividends go to the Balance Sheet Debit column.

Which of the following defines long-term liabilities?

Long-term liabilities are debts of a business that are not due to be settled within one year.

When preparing the Statement of Retained Earnings, which account is carried forward from the Income Statement?

Net income

What defines a long-term investment? (Check all that apply.) Notes receivable and stock and bond investments are assets that are expected to be held for more than one year. Long-term investments are used to produce or sell products and services. Long-term investments are sometimes referred to as noncurrent investments. Long-term investments are long-term resources that usually lack physical form.

Notes receivable and stock and bond investments are assets that are expected to be held for more than one year. Long-term investments are sometimes referred to as noncurrent investments.

Identify the accounts below that would be classified as a long-term investment. (Check all that apply.)

Notes receivable due in 2 years Investments in bonds

Which of the following could be a logical or realistic accounting period for a business that is creating financial statements? (Check all that apply.)

One-year period One-month period Six-month period

Which statements below are true regarding permanent and temporary accounts? (Check all that apply.)

Permanent accounts will appear on a post-closing trial balance. Temporary accounts are reported on the income statement. Permanent accounts are reported on the balance sheet. Temporary accounts have a balance for one period only. Retained Earnings is a permanent account, but Dividends is a temporary account.

Define plant assets by selecting the correct statements below. (Check all that apply.)

Plant assets are property, plant and equipment that are tangible. Plant assets are equipment and other assets that have a life greater than one year.

Which of the following statements correctly define(s) a profit margin? (Check all that apply.) Multiple select question. Profit margin is the ratio of a business's net income to its accounts receivables. Profit margin is also called return on sales. Profit margin is the amount of revenue received on a sale. Profit margin is the ratio of a business's net income to its net sales.

Profit margin is also called return on sales. Profit margin is the ratio of a business's net income to its net sales.

After an adjusted trial balance is prepared, what is the next step in completing the work sheet used in preparing financial statements?

Sort adjusted trial balance amounts to the financial statement columns.

The steps in the closing process are listed on the right. Match them to the correct order in which they would be performed (on the left). Instructions

Step #1 Identify accounts to be closed. Step #2 Journalize and post closing entries. Step #3 Prepare a post closing trial balance.

$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.

Select the statement below that explains how to use the Income Summary account.

The Income Summary account is used during the closing process to facilitate the closing of revenue and expense accounts.

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

The accounting cycle refers to steps followed by a company to prepare its financial statements. The cycle contains steps for adjusting and closing accounts. The accounting cycle is a series of steps repeated each reporting period. The accounting cycle contains 10 steps.

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 generally has more accounts listed than the unadjusted trial balance. The adjusted trial balance is used to prepare financial statements.

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.

Given that a company reported net income for the year, determine how a company would complete its work sheet for the period by choosing the correct statement below.

The company would add the net income amount to the Credit column of the Balance Sheet column of a work sheet.

Review the statements below and select the items that are correct regarding the operating cycle for a business. (Check all that apply.) Multiple select question. Most companies use a one-month period or operating cycle in deciding which assets and liabilities are current. Most operating cycles are greater than one year. The length of a company's operating cycle depends on its activities. Most operating cycles are less than one year. The operating cycle is the time span from when cash is used to acquire goods and services until cash is received from the sale of goods or services. Most companies use a one-year period or operating cycle in deciding which assets and liabilities are current.

The length of a company's operating cycle depends on its activities. Most operating cycles are less than one year. The operating cycle is the time span from when cash is used to acquire goods and services until cash is received from the sale of goods or services. Most companies use a one-year period or operating cycle in deciding which assets and liabilities are current.

$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.)

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

Which of the accounts below are considered accrued expenses?

Wages expense, Interest expense

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

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

When does the closing process take place?

at the end of an accounting period

Brown Co. had current assets of $15,000, total assets of $30,000 and current liabilities of $9,000 at the end of the year. The current ratio for the period is:

current ratio=current assets/current liabilities =15,000/9,000 which is equal to =1.67(Approx).

The closing process takes place at the ______ (end/beginning) of an accounting period, after the ________ (adjusted/unadjusted) trial balance is prepared and_________ (after/before) the financial statements are prepared.

end adjusted after

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

The expense recognition (matching) principle requires that _____ (expenses/assets/liabilities) be recorded in the same accounting period as the ______ (expenses/revenues/assets) that are recognized as a result of those costs. This principle is a major part of the _____ (timing/adjusting/estimating) process.

expenses revenues adjusting

The time span from when cash is used to purchase goods until cash is received from the sale of goods is called the _____ cycle.

operating

A reversing entry can be described as a(n): (Check all that apply.)

optional entry. entry whose purpose is to simplify a company's record keeping. entry that is the exact opposite of an accrual adjusting entry. entry that is used for adjusting entries involving accrued revenues and accrued expenses.

Show your understanding of the steps involved in adjusting entries by placing the following steps in the correct order of preparation.

prepare an unadjusted trial balance. journalize and post adjusting entries. prepare an adjusted trial balance. prepare financial statements.

Cash basis accounting recognizes _______ (equity/revenues/expenses) when cash is received and records ______ (revenues/expenses/liabilities) when cash is paid.

revenues 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 from them