Chapter 3

Which of the following financial statements typically is prepared last? Income statement Statement of stockholders' equity Balance sheet Statement of cash flows

Statement of cash flows

At the beginning of the accounting period, the balances of temporary accounts reflect the prior period ending balance are zero depend on whether the company was profitable during the prior period

are zero

The entries that transfer the balances of all temporary accounts to retained earnings are referred to as closing entries external entries adjusting entries post-closing entries

closing entries

After the adjusting entries have been completed, the balance in the Rent Expense account represents the: amount of the future benefit remaining in the account amount of rent owed at the end of the accounting period cost of rent for the accounting period

cost of rent for the accounting period

Define: + temporary accounts: + permanent accounts:

+ temporary accounts: accounts that are not carried by next period (e.g: revenues, expenses, dividends) + permanent accounts: accounts carried next period (e.g: assets, liability, equity)

Prepaid expenses should be ______ by the cost of the asset used during the accounting period. A)decreased B)unaffected C)increased

A)decreased

________ occur when the cash flow occurs after either the expense is incurred or the revenue is earned. (Enter only one word.)

accrual

Supplies that are not used immediately are recorded as a(n) ______ when purchased. revenue liability asset expense

asset

Which of the following would be referred to as "accruals?" (Select all that apply.) -Goods and services provided, not yet collected -Cash paid prior to expenses being incurred -Expenses incurred, not yet paid -Cash collected prior to goods or services being provided

-Goods and services provided, not yet collected -Expenses incurred, not yet paid

____________ is the price earned from selling goods or services to customers. (Enter one word per blank)

revenue

Adjusting entries ensure that ______ balances are reported at amounts representing the economic benefits that remain at the end of the period. A)asset B)revenue C)account D)asset and liability E)expense

A)asset

The adjusting entry for a prepaid expense includes a debit to a(n) ______ account and a credit to a(n) ____ account. A)revenue; liability B)asset; expense C)liability; revenue D)expense; asset

D)expense; asset

True or false: Adjusting entries ensure that assets in the balance sheet are reported at amounts that have been used up or expired during the period.

False Reason: Adjustments remove the value of assets that have been used up or expired during the period, leaving a balance that represents the economic benefit remaining in the account.

_________ occur when the cash flow occurs after either the expense is incurred or the revenue is earned. (Enter only one word.)

accural

Revenue in the income statement for the year ended December 31, 2018 equals the ______. amount of cash collected from customers during 2018 amount earned by selling goods or services to customers during 2018 accounts receivable balance in the December 31, 2018 balance sheet

amount earned by selling goods or services to customers during 2018

After the adjusting entries have been completed, the adjusted balance in the Prepaid Rent account represents the ______. amount of the prepayment that has expired during the period amount that is owed for rent amount of the prepayment that remains towards future rental periods

amount of the prepayment that remains towards future rental periods

The adjusting entry for supplies used during the period will result in ______ to the Supplies Expense account. a decrease no change an increase

an increase

A prepayment such as "Prepaid Insurance" is originally recorded as a(n) ___________ , when an insurance policy is purchased and will later be expensed in the period used.

asset

Neumann Corporation purchases supplies that will be used during the following quarter. At the time of purchase, the supplies should be recorded as a(n) revenue expense liability asset

asset

After the adjusting entries have been completed, the balance in the Rent Expense account represents the: amount of the future benefit remaining in the account cost of rent for the accounting period amount of rent owed at the end of the accounting period

cost of rent for the accounting period

The adjusting entry for supplies used requires a _________ to Supplies and a _________ to Supplies Expense.

credit; debit

The adjusting entry to record the supplies used during the period will result in a(n) ______. decrease to Supplies and an increase to Supplies Expense increase to Supplies and an increase to Supplies Expense decrease to Supplies and a decrease to Supplies Expense increase to Supplies and a decrease to Supplies Expense

decrease to Supplies and an increase to Supplies Expense

The process of allocating the cost of an asset to expense over the useful life of the asset is called contra accounting. depreciation. asset valuation. book value.

depreciation.

If an adjusting entry's credit is to a liability account, then the debit must be to ______. prepaid expense cash expense revenue expense

expense (DEALOR)

A primary purpose of adjusting entries is to record events that have been recorded incorrectly. have occurred but that have not yet been recorded. will occur at the beginning of the next period.

have occurred but that have not yet been recorded.

The adjusting entry for a deferred revenue includes a debit to a(n) _________ account and a credit to a(n) ________ account. (Enter only one word per blank.) Listen to the complete question

liability; revenue

At year-end, companies that utilize accrual-based accounting systems complete the measurement process through the preparation of an unadjusted trial balance posting of non-cash transactions occurring during the year recording of adjusting entries conversion to cash-basis

recording of adjusting entries

After the adjusting entries have been completed, the ending balance in the Supplies account represents the cost of supplies ______. remaining at the end of the accounting period purchased, but not yet paid for, at the end of the accounting period used during the accounting period purchased during the accounting period

remaining at the end of the accounting period

Which of the following would be referred to as "accruals?" (Select all that apply.) - Cash collected prior to goods or services being provided - Cash paid prior to expenses being incurred - Expenses incurred, not yet paid - Goods and services provided, not yet collected

- Expenses incurred, not yet paid - Goods and services provided, not yet collected

*** During December, Mainzel Interior Design Corporation redecorated the reception areas of a local hotel. The project was completed on December 31 with payment due in 30 days. Payment was received on January 21 of the following year. When should Mainzel recognize the related revenue using accrual accounting? January 31 January 21 December 31

December 31

*** Taggert Company paid $1,800 for a 6-month insurance premium on December 1. Which of the following statements are correct regarding the accounting for this insurance over the six-month period? (Select all that apply.) Taggert will credit Prepaid Insurance for $300 on Dec. 31. Taggert will debit Insurance Expense for $1,800 on Dec. 1. Taggert will debit Prepaid Insurance for $1,800 on Dec. 1. Taggert will debit Prepaid Insurance for $1,500 on Dec. 31. Taggert will debit Insurance Expense for $300 on Dec. 31.

- Taggert will credit Prepaid Insurance for $300 on Dec. 31. - Taggert will debit Insurance Expense for $1,800 on Dec. 1. Taggert will debit Insurance Expense for $300 on Dec. 31.

*** When a company records an adjusting entry for services previously recorded as Deferred Revenue, it records which two of the following? [SELLECT ALL CORRECT] credit to Cash credit to Accounts Receivable credit to Revenue debit to Deferred Revenue debit to Cash credit to Deferred Revenue

- credit to Revenue - debit to Deferred Revenue (decrease D. R)

Under cash-basis accounting, (Select all that apply.) revenues are recorded when goods or services are provided. expenses are recorded when cash is paid. expenses are recorded in the period related revenue is generated. revenues are recorded when cash is received.

- expenses are recorded when cash is paid. - revenues are recorded when cash is received.

*** On July 1, Book Palace prepaid 12 months' fire insurance with coverage starting the following month. The adjusting entry on December 31 includes: (Select all that apply.) -debit to Insurance Expense -credit to Prepaid Insurance -debit to Cash -credit to Cash -debit to Prepaid Insurance

-debit to Insurance Expense -credit to Prepaid Insurance

During December, Mainzel Interior Design Corporation redecorated the reception areas of a local hotel. The project was completed on December 31 with payment due in 30 days. Payment was received on January 21 of the following year. When should Mainzel recognize the related revenue using accrual accounting? January 21 January 31 December 31

December 31

Which financial statement would report all of the following information: beginning balances for common stock and retained earnings; current period net income or loss; current period dividends; common stock issued during the year; ending balances of common stock and retained earnings? Comprehensive income statement Balance sheet Income statement Statement of stockholders' equity Retained earnings statement

Statement of stockholders' equity

Reporting revenues when goods or services are provided and expenses in the period they are incurred to generate related revenues is referred to as __________ -basis accounting.

accural

Prepaid expenses should be ______ by the cost of the asset used during the accounting period. Multiple choice question. unaffected increased decreased

decreased

Which of the following transactions are examples of prepayments that will require an adjustment at the end of the accounting period on December 31? (Select all that apply.) -A company records interest expense that has accrued, but will not be paid until next year. -A company pays a 6-month insurance premium at the beginning of October. -A company pays for 4 months of advertising in the Wall Street Journal on November 1. -A company pays a utility bill for charges incurred in the previous month.

-A company pays a 6-month insurance premium at the beginning of October. -A company pays for 4 months of advertising in the Wall Street Journal on November 1.

The post-closing trial balance helps to verify that: (Select all that apply.) we prepared and posted adjusting entries correctly the company was profitable during the current period the accounts are ready for next period's transactions we prepared and posted closing entries correctly

the accounts are ready for next period's transactions we prepared and posted adjusting entries correctly

After the adjusting entries have been completed, the adjusted balance in the Supplies Expense account represents the cost of supplies: purchased during the accounting period on hand at the end of the accounting period purchased, but not yet paid for, at the end of the accounting period used during the accounting period

used during the accounting period