Orion 4

Huffing Corporation issued a one-year 9%, $100,000 note on April 30, 2014. Interest expense for the year ended December 31, 2014 was

$6,000 *($100,000 x 0.09 x 8/12 = $6,000)

Which necessary principle is followed in adjusting entries?

-conformity with GAAP -revenue recognition -expense recognition

An adjusting entry recording accrued salaries for a period indicates that Salaries and Wages Expense has been been paid but not yet recorded.

False

Before an adjusting entry is made to record accrued revenue, the accounts of a business reflect an overstated asset and an overstated revenue.

False

Failure to prepare an adjusting entry at the end of a period to record an accrued revenue would cause an overstatement of assets and an overstatement of revenues.

False

The adjusted trial balance is prepared after the preparation of the financial statements.

False

A law firm received $2,000 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Service Revenue. The services were completed before the end of the year however, no adjusting entry has been prepared. Which of the following is correct?

Revenues will be understated

Adjusting entries are always reflected on the balance sheet.

True

The adjusting entry for accrued salaries requires a debit to Salaries and Wages Expense.

True

The total of an adjusted trial balance is equal on both sides

True

Revenues for services performed but not yet recorded at the statement date are ______ revenues?

accrued

An adjusted trial balance includes

both temporary and permanent accounts

Juanita has performed $750 of consultancy for a client but has not billed the client as of the end of the accounting period. The adjusting entry in Juanita's books will be

debit Accounts Receivable and credit Service Revenue

Permanent accounts will have ________ balances in a post-closing trial balance.

equal

Revenue received before it is recognized and expenses used or consumed before being paid are both initially recorded as

liabilities

______ accounts will appear in a post-closing trial balance.

permanent

A post-closing trial balance will show

permanent accounts to be carried forward to the next accounting period

Post-closing trial balance is prepared after

preparing the income statement

After closing the temporary accounts, the balance in the income summary statement is transferred to

retained earnings

What is the purpose of an adjusted trial balance?

to prove the equality of all debit and credit balances after all adjustment

At the end of the fiscal year, the usual adjusting entry for accrued salaries owed to employees was omitted. This will lead to liabilities at the end of the year being

understated