Marketing

Prepaid insurance is a(n) ______.

asset in the balance sheet.

An adjusting entry for accrued expenses involves:

debit to an expense credit to a liability

The post-closing trial balance checks that total _______equal total ______ at the end of the period.

debits, credits

The process of allocating the cost of an asset to expense over the useful life of the asset is called

depreciation.

Deferred revenue is a(n) ______.

liability

At year-end, companies that utilize accrual-based accounting systems complete the measurement process through

recording of adjusting entries

Closing entries move the balances from the ______ accounts into the Retained Earnings account.

temporary

Which of the following would be referred to as "accruals?"

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

On April 1, Katie Inc. collected $2,400 from a customer for a 12-month membership starting on that date. On December 31, Katie Inc. should credit:

Service revenue for $1,800 Katie already provided service for 9 months.

Norbert Inc. delivered goods and services during December. Payment is expected during the first week of January. The related adjusting entry should consist of a debit to a(n) ____ account and a credit to a(n) _____ account.

asset; revenue

On August 1, 2019, a firm prepaid $53,520 for 2 years' rent of an office building. On March 1, 2020, the firm prepaid $34,800 for 2 years' rent of a warehouse. The rent agreements on both buildings went into effect on the dates the rents were prepaid. What amount will be shown for prepaid rent on the December 31, 2020 balance sheet?

$35,910 Reason: (($53,520/24 months) x 7 months remaining)+(($34,800/24 months) x 14 months remaining). Note that the question is asking for the Prepaid rent on the balance sheet on December 31, 2020 and not the expense on the income statement.

Which of the following transactions are examples of prepayments that will require an adjustment at the end of the accounting period on December 31?

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

The entries that transfer the balances of all temporary accounts to retained earnings are referred to as

Closing entries

_____ revenue arises when a business receives cash in one period, but does not provide all of the related goods or services until a later period.

Deferred

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.

When should supplies be recorded as an expense?

In the period the supplies are used, regardless of when they were purchased.

Which of the following statements is true?

Income statement accounts are temporary accounts, while balance sheet accounts are permanent accounts.

_____ is defined as the "cost of borrowing money."

Interest

Which of the following statements is correct regarding the adjusting entry to record interest accrued on a note payable?

Interest on the note payable is classified as an expense since it is a cost of borrowing.

The statement of stockholders' equity includes these amounts:

Net Income ending balance retained earnings dividends for the period

How do temporary accounts differ from permanent accounts?

Only temporary accounts are cleared out at the end of the accounting period.

On November 1, 2019, Movers, Inc., paid $24,000 for 2 years' rent beginning on November 1 (assume rent is the same amount each month). Movers' year-end financial statements as of December 31, 2019 will show: (Select all that apply.)

Prepaid rent 22,000 Rent 2000

Which of the following transactions would normally be recorded as an asset when cash is paid?

Rent paid in advance

On April 1, Katie Inc. collected $2,400 from a customer for a 12-month membership starting on that date. On December 31, Katie Inc. should credit:

Service revenue for $1,800

Which of the following financial statements typically is prepared last?

Statement of cash flows.

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?

Statement of stockholders' equity

The adjusting entry for an accrued revenue always includes:

a credit to a revenue account a debit to an asset account

In an adjusting entry for expenses incurred but not yet paid ______.

a liability is increasing since cash will be paid in the future due to the expense incurred

To complete the measurement process, companies need to update balances of assets, liabilities, revenues and expenses for changes created by _________ entries.

adjusting

In recording an accrual adjusting entry to account for revenues earned but not yet collected, ______.

an asset is increased since cash will be collected at a later date

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 or debit

A classified balance sheet shows subtotals for current ______ and current ________.

assets liabilities

Prepaid rent appears in the ____

balance sheet because it is an asset.

Prepaid expenses should be ______ by the cost of the asset used during the accounting period.

decreased

______ is an allocation of the cost of buildings, vehicles, and equipment to expense over time as they are used.

depreciation.

Initially a prepayment for items such as rent or insurance are recorded as assets and later are recorded as a(n) ______ in the period the benefit expires.

expense

The two major categories reported in the income statement are:

expense revenue

The information reported in the statement of cash flows is organized by these activities:

financing operating investing

A classified balance sheet ______.

groups asset and liabilities into current and long-term categories

A primary purpose of adjusting entries is to record events that

have occurred but that have not yet been recorded.

Revenues and expenses are reported in the:

income statement

If an adjusting entry's debit is to an expense account, then the credit must be to which of the following?

liability prepaid expense

The adjusting entry for a deferred revenue includes a debit to a(n) ______ , Incorrect Unavailable account and a credit to a(n) _____ account.

liability; asset

The post-closing trial balance helps to verify that:

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

After the adjusting entries have been completed, the adjusted balance in the Supplies Expense account represents the cost of supplies:

used during the accounting period