Acct 211

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

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

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

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

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

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

A calendar year-end reporting period is defined as a (1 / 3 / 12) -month period which ends on___

12 December

Trial balance

A list of accounts and their balances at a point in time.

What is a plant asset?

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

Work sheet

An internal accounting aid which helps in preparing financial statements.

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.

Blank 1: 100 Blank 2: 3,600

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

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 Blank 3: 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 (Retained earnings / Cash) account balance as well as any debit balance in the supplies (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

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.

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.

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 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.

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

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

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

Prepaid insurance Prepaid rent Supplies

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

Prepaid rent Accounts receivable Office supplies Cash

Balance sheet

Reports a business's assets, liabilities and equity on a specific date.

Income Statement

Reports a business's revenues and expenses for a period of time.

Statement of cash flows

Reports the inflows and outflows of cash during a period of time.

$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.

Which of the following accounts is considered a prepaid expense?

Supplies

$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.

$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.

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.

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.

Which of the accounts below are considered accrued expenses?

Wages expense, Interest expense

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 revenue recognition principle states that revenue:

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

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

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

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

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

Which of the following statements correctly define(s) a profit margin? (Check all that apply.)

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

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

*Revenues are always recorded in the period in which they are earned. *Comparability of financial statements is improved. *Expenses are always recognized in the period in which they are incurred.

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

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

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

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

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

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.)

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

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.

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

*determine what the current balance is *determine what the balance should be *make the adjusting entries

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

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

The expense recognition matching principle aims to record ___ in the same accounting period as the ___ that are earned as a result of those costs. This principle is a major part of the ___ process.

*expenses *revenues *adjusting

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

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