Prechapter 3

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

- liability -prepaid expense

Which of the following pre-payments requires an adjusting entry at the end of the year?

On November 1, the company pays rent for the next six months.

The information reported in the statement of cash flows is organized by these activities: Multiple select question.

operating investing financing

Adam Corporation uses the cash-basis of accounting. Adam Corporation should record expenses when:

paid

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

recording of adjusting entries

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

rent paid in advance

Temporary

revenues, expenses, dividends

Which of the following statements describes the effect that adjusting entries may have on liabilities?

Adjusting entries increase liabilities for the amount of any accrued and unpaid expenses at the end of the period.

At the beginning of the accounting period, the balances of temporary accounts

are zero

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

Adjusting entries ensure that ______ balances are reported at amounts representing the economic benefits that remain at the end of the period.

asset

Permanent

assets, liabilities, equity

Reporting revenues only when cash is received and expenses only when cash is paid is called the________ basis of accounting.

cash

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

expense

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

Adjusting entries help to ensure that all ______ are recorded in the period in which they are incurred.

expenses

A classified balance sheet ______.

groups asset and liabilities into current and long-term categories

After the adjusting entries have been completed, the adjusted balance in the Deferred Revenue account represents:

the amount of the sales or services still owed to the customer

The accounting basis that records revenues in the period that goods and services are provided to customers is referred to as

accrual-basis accounting

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

-basis accounting helps measure and report revenues and expenses in a way that clearly represents the net income of the company. (Enter only one word.)

accrual

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

adjusting

A prepayment that is originally recorded as an asset will be ______.

allocated to future accounting periods based on the cost of the asset used during the period

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

true

is defined as the "cost of borrowing money." (Enter one word per blank)

interest

On November 1, 2019, Movers, Inc., paid $24,000 for 2 years' rent beginning on November 1. The Prepaid rent balance at December 31, 2019 equals ______.

$22,000

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

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.

A classified balance sheet shows subtotals for current _________ and current___________ . (Enter one word per blank) Correct Answer

- asset - liability

A prepayment is originally recorded as an asset. An adjusting entry at the end of the accounting period results in a(n) ______ in the asset account and a(n) ______ in the expense account.

- decrease - increase

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

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

An adjusting entry for accrued expenses involves

-credit to a liability -debit to an expense

The post-closing trial balance checks that total _______ equal total _______ at the end of the period. (Enter only one word per blank.)

-debits - credits

Supplies should be ______ and Supplies Expense should be ______ for the cost of supplies used up during the period.

-decreased - increased

Adjusting entries:

-update the accounts to their proper balances - are needed before financial statement preparation

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? Multiple choice question.

Statement of stockholders' equity

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

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

closing entries

Depreciation is an allocation of the_______ of buildings, vehicles, and equipment to expense over time as they are used.

cost

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?

december 31st

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

decreased

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

depreciation

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

false

The expense that relates to a formal note payable and accumulates or accrues throughout the accounting period is referred to as __________ expense

interest

Deferred revenue is a(n) _____________.

liability

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

temporary