chapter 4 smart book
Beauty and the Bistro, Inc. had $500 of Supplies on its balance at the end of its 1st year of business. It purchased $5,000 of supplies during the 2nd year. At the end of the 2nd year, it had $800 of supplies on hand. What is the amount of Supplies Expense on the income statement?
$4,700
adjusted trial balance's debits will not equal its credits
Accounts Receivable
Accounts Receivable
a debit to Accounts Receivable and credit to Service Revenue.
When should supplies be recorded as an expense?
In the period the supplies are used, regardless of when they were purchased
Closing journal entries are recorded ______.
after the financial statements have been prepared
Adjustments help to ensure that all ______ are recorded in the period in which they are incurred.
expenses
The adjustment for supplies used during the period will result in a(n) ______ to the Supplies Expense account.
increase
The adjusting entry to record wages incurred but not yet recorded includes a credit to ______.
wages payable
Place the steps taken at the end of the accounting period to complete the financial statement preparation process in the correct order.
1. prepare the adjusting entries 2. prepare an adjusted trial balance 3. prepare the financial statement
the adjusting entry to record interest owed on obligations at the end of the accounting period includes a debit to "interest _____" and credit to "Interest _____"
Blank 1: Expense or Expenses Blank 2: Payable
_____ is the process of allocating the cost of buildings, vehicles, and equipment to expense over time as they are used.
Blank 1: Depreciation
An ___ trail ___ is prepared immediately the adjusting entries have been recorded and ____ the finances statement are prepared
Blank 1: adjusted Blank 2: balance Blank 3: after Blank 4: before or prior
As of December 31, $2,500 of interest expense has accrued on a $50,000 note payable. The note payable and the accrued interest will become due and payable next year. How will the interest affect the adjustments at the end of the period?
Interest Expense should be increased, because the cost of interest relates to the current period.
Which of the following account balances will typically be increased as a result of adjusting entries? (Select all that apply.)
Interest Payable Supplies Expense
Which of the following transactions constitutes an accrual adjustment involving a revenue account?
Interest Revenue on a note receivable
Beauty and the Bistro, Inc. had $5,000 of supplies available to use during the year. At the end of the year, it recorded an adjusting entry for $4,500 for the amount used during the year. Supplies on the balance sheet equals ______.
$500
Place the steps in the adjustment process in order. Drag the items to put them in the proper order with the first step on top.
1. analyze the accounts to determine the amount of the adjustment 2. record the adjusting entry in the journal 3. summarize the adjusting entries in the accounts
Bristol, INC. paid $800 for a 4-month insurance policy on August 1 of the current year. On August 31, Bristol, Inc. made an adjusting entry to account for the insurance that expired during the month of August. The adjusting entry contained a debit to Insurance Expense in the amount of ___ and a credit to Prepaid Insurance in the amount of ___. The remaining balance in the Prepaid Insurance account after the adjustment was ___?
200, 200, 600
When recording an adjustment for the use of equipment during the current accounting period, which two accounts are affected?
Accumulated Depreciation and Depreciation Expense
Which of the following is true regarding depreciation of equipment?
Accumulated Depreciation is a contra-account that reports the amount of usefulness used as of the balance sheet date. Depreciation is reported in Accumulated Depreciation which is netted against the related Equipment account on the balance sheet. Accumulated Depreciation is increased as the equipment is used causing the carrying value to decrease on the balance sheet.
The adjusting entry to record salaries and wages owed to employees at the end of the accounting period includes a debit to "salary and wages _____________ " and a credit to "salaries and wages _____________"
Blank 1: Expense Blank 2: Payable
Without ____ entries, financial statements would present an incomplete and misleading picture of the company's financial position.
Blank 1: adjusting, adjustment, or adjusted
Which of the following entries records the adjustment for income tax accrued, but not yet paid?
Debit Income Tax Expense and credit Income Tax Payable.
As of December 31, the unadjusted balance in Deferred Revenue contains $5,600 for unredeemed gift cards. An analysis of the monthly sales indicates that $3,200 gift cards were redeemed during the month but not yet recorded. How will these transactions affect the adjustments at the end of the period?
Deferred Revenue needs to be decreased by the amount of gift cards redeemed during the month. Sales Revenue needs to be increased by the amount of gift cards redeemed during the month.
Select the following statements that are correct regarding Dividends? (Check all that apply.)
Dividends are closed into retained earnings by crediting Dividends. Dividends are closed into retained earnings by debiting Retained Earnings. Dividends have a normal debit balance.
On June 30, Planet of the Crepes paid $12,000 in advance for insurance coverage beginning July 1 through December 31. Which of the following are correct regarding the July financial statements? (Select all that are correct.)
Insurance Expense of $2,000 is on the income statement Prepaid Insurance of $10,000 is on the balance sheet
The adjustment for supplies used during the period will result in a debit to the ______ account and a credit to the ______ account.
Supplies Expense; Supplies
Blank 1: increase, debit, or dr Blank 2: 3,000
The account represents tax refunds due to the company.
Adjusting entries to adjust Supplies or Prepaid Rent have which of the following effects? (Select all that apply.)
The carrying value of the assets are decreased. Total assets is decreased on the balance sheet. Total expenses on the income statement are increased.
What is the purpose of preparing an adjusted trial balance?
To ensure that total debits equal total credits after the adjustments have been recorded
What are the effects on the accounting equation from the adjustment for income tax expense accrued, but not paid, at the end of the accounting period?
Total liabilities will increase and total stockholders' equity will decrease.
Adjusting entries are required to ______.
adjust the unadjusted balances to the desired balances
A prepayment that is originally recorded as an asset will be:
allocated to future accounting periods based on the value of the benefit used during the period.
Which of the following adjusting entries will cause assets and stockholders' equity to increase? Adjusting for services provided
but not yet collected.
The adjusting entry to record depreciation on equipment includes a ______. (Select all that apply.)
debit to Depreciation Expense credit to Accumulated Depreciation
A prepayment is originally recorded as an asset. Later at the end of the accounting period, an adjustment is recorded causing in a(n) ______ in the asset account and a(n) ______ in the expense account.
decrease; increase
After the adjustments have been completed, the adjusted balance in Income Tax Expense account represents ______.
total income tax that has been paid and accrued during the period
Sterling Company paid $1200 for 3 months of rent on April 1 of the current year. On April 30 Sterling Company made an adjusting entry to account for the rent that expired during the month of April. The adjusting entry included a debit to Rent Expense in the amount of __________ and a credit to Prepaid Rent in the amount of ____________. The remaining balance on Prepaid Rent account after the adjustments is____________.
400, 400, 800
The step in the accounting cycle where entries are recorded to update retained earnings and zero out temporary accounts is referred to as the _____ process. (Enter one word per blank.)
Blank 1: closing or close
If an asset account such as Equipment has a normal debit balance, the associated contra-account should have a normal ____ balance. (Enter one word per blank.)
Blank 1: credit or cr
Accumulated Depreciation has a normal _____ balance which indicates that it _____ Total Assets. (Enter one word per blank.)
Blank 1: credit, negative, or cr Blank 2: decreases, reduces, lowers, offsets, decreased, decreases, or subtracts
The adjusting entry to record the revenue earned by the seller fulfilling its obligation results in a(n) _____ to the Deferred Revenue account. (Enter one word per blank.)
Blank 1: decrease, debit, reduction, or dr
As of December 31 (the end of the accounting period), ABC Company has a profit before tax of $12,000. The company's tax rate is 25%. The adjustment will include a(n) _____ of $_____ to Income Tax Expense.
Blank 1: increase, debit, or dr Blank 2: 3,000
the accounts receivable account should be _____ when adjusting at the end of the period for any revenues that have been earned buy not yet collected or recorded.
Blank 1: increased or debited
After the adjustments have been completed, the adjusted balance in Income Tax Payable represents the amount ______ to the government at the end of the accounting period. (Only add one word per blank.)
Blank 1: owed, due, payable, owe, or unpaid
The closing entry for dividends involves a debit to Retained Earnings and a credit to Dividends.The debit to Retained Earnings causes a(n) ____ in the balance of the account.
Blank 1: reduction, decrease, or drop
What is the purpose of the depreciation adjustment for long-lived assets?
Depreciation allows the company to allocate the cost of an asset over the years the asset benefits the company.
In its 1st year of business, Daily Grind, Inc. purchased $1,000 of supplies of which it only has $300 left at the end of the period. Which of the following will be found in the year-end financial statements? (Select all that apply.)
Supplies Expense on the income statement of $700 Supplies on the balance sheet of $300
What are the effects on the financial condition of the business from the adjustment for revenues from the seller fulfilling its obligations that have not yet been collected?
Total assets will increase and total stockholders' equity will increase.
If a company recorded an adjusting entry by debiting Interest Expense for $500 and Interest Payable for $50 in error, then the ______.
adjusted trial balance's debits will not equal its credits
On June 30, Daily Kneads paid $12,000 in advance for one year of insurance coverage beginning July 1. Match each line item with the correct amount that would be reported in the following month, July, and on which July financial statement the line item would be reported. insurance expense-- prepaid insurance --
insurance expense-- $1,000 on the income statement prepaid insurance --$11,000 on the balance sheet
The carrying value of Supplies represents the cost of supplies ______.
on hand at the end of the accounting period
Which account will need an adjusting entry to adjust for the amounts used during the period that were paid for in advance?
prepaid rent
Which of the following is true about the adjusting entry to record the revenue for which the seller has performed of its obligations but not yet collected? (Select all that apply.)
stockholders' equity will increase assets will increase
Match each financial statement line item with the appropriate description. supplies expense ------ supplies ---- accounts payable ------
supplies expense ------Amount used and reported on the income statement supplies ---- Amount remaining and reported on the balance sheet accounts payable ------Amount owed for supplies purchased on account
Adjusting entries are important because ______. (Select all that apply.)
without them, the financial statements would be misleading. adjustments ensure that the balance sheet reports all of the economic resources the company owns and all of the obligations the company owes