chapter 3

McDarrel's records $500 of accrued salaries on December 31. Three days later, on January 3, total salaries of $4,000 (including the $500 accrued at year end) are paid. Demonstrate the required journal entry on January 3 by selecting from the choices below. (Check all that apply.) Multiple select question. Wages expense will be debited for $4,000.

Salaries expense would be debited for $3,500. Salaries payable will be debited for $500. Cash would be credited for $4,000.

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

CURRENT ASSETS long term inves. plant asset intangible asset current liabilities long term liabilit

$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.

The adjusted trial balance generally has more accounts listed than the unadjusted trial balance. 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.

What is the difference between an adjusted trial balance and an unadjusted trial balance

An adjusting journal entry is made at the end of an accounting period to reflect a transaction or event that is not yet recorded.

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

Summarize the closing process by listing the closing entries in the order in which they would occur at the end of the accounting period. Step 1: Close Income Statement (credit/debit) balance accounts. Step 2: Close Income Statement (credit/debit) balance accounts. Step 3: Close (income summary/withdrawals) . Step 4: Close (income summary/withdrawals) .

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

purpose of post closing trial balance

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.

Which of the lists below contains only permanent accounts? Multiple choice question.

Retained Earnings; Accounts Payable; Accumulated Depreciation

unearned revenues

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

$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.

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

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

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

interest expense

amount owed x interest rate x fraction of the year since last payment

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

post closing trial balance

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

Describe your understanding of the closing process by identifying the correct steps below.

closing process

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

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. A contra account would be subtracted from another account.

contra

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

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.)

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.

Which of the following describes accrued revenue?

closing process

close income statement credit balances close income statement debit balances close income summary account close dividends Mcgraww - Close income statement credit balance accounts; close income statement debit balance accounts; close income summary; close withdrawals.)

A special category of prepaid expenses is plant assets, also called Property, Plant, & Equipment (PP&E). Plant assets are long-term tangible assets used to produce and sell products and services. Examples include buildings, machines, vehicles, and equipment. Plant assets provide benefits for more than one period. All plant assets (excluding land) eventually wear out or become less useful.

plant asset

Which of the following statements describes why accrual accounting better reflects a business's performance? (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.

A plant asset can be defined by which of the following statements?

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

Wages Expense; Income Summary; Dividends

Which of the following lists contains only temporary accounts?

Insurance expense would be debited for $300.

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.

accounting cycle

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