Chapter 2 Smartbook

Lassiter Corp. uses the periodic inventory method. During the year, Lassiter purchases $10,000 of inventory. Ending inventory is $6,000. Cost of goods sold is $12,000. Beginning inventory was: $4,000 $18,000 $8,000 $16,000

$8,000

Match the following components of the basic accounting equation. 1. Assets >>> [BLANK] 2. Liabilities >>> [BLANK] 3.Stockholders' Equity >>> [BLANK] - Resources - Creditors' claim to resources - Owners' claim to resources

1. Resources 2. Creditors' claim to resources 3. Owners' claim to resources

Accruals involve transactions where the cash outflow or inflow takes place in a period [BLANK] expense or revenue recognition. before the same as after

After

Prepaid expenses are the cost of [BLANK] acquired in one accounting period and [BLANK] in a future period. (Enter one word per blank.)

Assets & Expensed

The basic accounting equation is Assets = Liabilities + Stockholders' Equity Assets + Stockholders' Equity = Liabilities Assets + Liabilities = Stockholders' Equity Assets = Liabilities - Stockholders' Equity

Assets = Liabilities + Stockholders' Equity

The basic accounting equation is Assets = Liabilities + Stockholders' Equity Assets + Stockholders' Equity = Liabilities Assets = Liabilities - Stockholders' Equity Assets + Liabilities = Stockholders' Equity

Assets = Liabilities + Stockholders' Equity

The [BLANK] [BLANK] [BLANK] portrays the equality between the total economic resources of a company and the total claims to those resources by creditors and owners.

Basic Accounting Equation

Which of the following is the correct formula to calculate cost of goods sold? Multiple choice question. Ending inventory + purchases - beginning inventory Beginning inventory + purchases - ending inventory Beginning inventory - purchases + ending inventory Beginning inventory + ending inventory - purchases

Beginning inventory + Purchases − Ending inventory

The adjusting journal entry required when deferred revenue is recognized includes a [BLANK] entry to revenue.

Credit

On July 1, Davis Corporation receives $10,000 for rent in advance from a tenant. Which of the following are correct for Davis to record? (Select all that apply.) Debit prepaid rent $10,000 Credit deferred rent revenue $10,000 Credit cash $10,000 Debit cash $10,000

Credit deferred rent revenue $10,000 Debit cash $10,000

The adjusting journal entry required when deferred revenue is recognized includes a [BLANK] entry to a liability.

Debit

The journal entry to record the issuance of 100 shares of $5 par value common stock for $500 would include which of the following? Debit common stock $500. Debit cash $500. Credit retained earnings $500. Credit additional paid-in capital $500.

Debit cash $500.

On October 1, Year 1, Swift Corporation received $1,200 from customers for services to be performed evenly over the next 12 months. Swift recorded the original transaction in a balance sheet account. The adjusting journal entry on December 31, Year 1, will include which of the following entries? Debit revenue $300. Credit deferred revenue $1,200. Credit to revenue $1,200. Debit to deferred revenue $300.

Debit to deferred revenue $300.

Cost of assets acquired in one accounting period and expensed in a future accounting period are [BLANK] [BLANK]. (Enter one word per blank.)

Prepaid & Expenses

Which of the following are examples of prepayments? Revenue collected when it is earned Expense paid when it is incurred Purchasing supplies that will be used later

Purchasing supplies that will be used later

What transaction results in a debit to cash and a credit to deferred rent revenue? The receipt of rent in advance. The using up of rent paid in advance. The using up of rent received in advance. The payment of rent in advance.

The receipt of rent in advance.

At the end of the period, an unadjusted [BLANK] balance, a listing of all accounts with their respective balances, is used to assist in the preparation of adjusting entries, financial statements, and closing entries. (Enter one word per blank)

Trial

To record the issuance of common stock at par value, (Select all that apply.) credit cash debit cash debit common stock credit common stock

debit cash & credit common stock

A situation that requires an adjusting entry that is not a prepayment or an accrual entry is paying suppliers on account. estimating bad debts. collecting cash from customers. closing the accounts at year-end.

estimating bad debts.

Prepaid expenses are: expenses incurred before cash is paid expenses paid at the time incurred expensed in a later period than cash was paid

expensed in a later period than cash was paid

Prepaid expenses are: expenses paid at the time incurred expenses incurred before cash is paid expensed in a later period than cash was paid

expensed in a later period than cash was paid

Deferred revenue is a(n): expense on the income statement liability on the balance sheet revenue on the income statement asset on the balance sheet

liability on the balance sheet

The components of the income statement are usually classified as: (Select all that apply.) non-operating items financing items investing items operating items

non-operating items operating items

A Blank______ liability is a liability that will be satisfied in more than 1 year or operating cycle, whichever is longer, in the future. current noncurrent

noncurrent

How are items classified on the income statement? current and noncurrent operating, investing, and financing assets and liabilities operating and nonoperating

operating and nonoperating

One of the purposes of adjusting entries is to ensure debits equal credits. recognize all revenues earned during the period. record all external transactions at the end of the year. make assets equal liabilities plus owners' equity.

recognize all revenues earned during the period.

The first step in the closing process is to reduce the balances in the temporary accounts to zero. The second step is to transfer the effects of step 1 to which account? dividends retained earnings cash common stock

retained earnings

To record an adjusting entry when deferred revenue is recognized: deferred revenue is credited revenue is debited revenue is credited deferred revenue is debited

revenue is credited deferred revenue is debited

Adjusting entries help a company accurately measure (Select all that apply.) the cash received and paid during the year. the company's financial performance. revenues and expenses for the period.

the company's financial performance. & revenues and expenses for the period.

Which of the following is an example of an estimate? (Select all that apply.) accounting for depreciation accounting for bad debts accounting for expenses incurred not yet paid

accounting for depreciation accounting for bad debts

Accruals occur when cash flow comes: (Select all that apply.) after expense recognition before revenue recognition after revenue recognition before expense recognition

after expense recognition after revenue recognition

Accruals occur when cash flow comes: (Select all that apply.) before expense recognition before revenue recognition after expense recognition after revenue recognition

after expense recognition after revenue recognition

At the end of the accounting period, before the adjusting entries are recorded: an unadjusted trial balance is prepared a closing balance is prepared an adjusted trial balance is prepared

an unadjusted trial balance is prepared

Prepayments occur when cash flow precedes expense or revenue recognition sales are delayed pending credit approval manufactured goods await quality control inspections customers are unable to pay the full amount due when goods are delivered

cash flow precedes expense or revenue recognition

A deferred revenue liability appears on the balance sheet for: cash received before revenue is earned revenue earned before cash is collected cash received at the same time revenue is earned

cash received before revenue is earned

The process in which temporary accounts are reduced to zero balances and transferred to retained earnings is the Blank______ process. zero opening closing adjusting

closing

Those liabilities that will be satisfied within 1 year or the operating cycle, whichever is longer, are referred to as [BLANK] liabilities.

current OR short-term