Smartbook Study Ch. 4

An asset's book value or carrying value is its ______.

cost minus accumulated depreciation

Accumulated Depreciation has a normal ______ balance which indicates that it _____ Total Assets.

credit; decreases

Adjustments to revenue accounts at the end of the accounting period are made to adhere to accrual accounting principles, specifically the ______ principle.

revenue recognition

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 statements is correct regarding the adjustment to record interest accrued on a note payable?

Interest is classified as an expense since it is a cost of borrowing.

What are the effects on the accounting equation from the adjusting entry for interest expense accrued, but not paid, at the end of the accounting period?

Total liabilities will increase and total stockholders' equity will decrease.

Which of the following statements is correct regarding a noncurrent asset such as equipment?

The original cost in the Equipment account will not change during the adjustment process.

Which of the following statements is true regarding the post-closing trial balance?

The post-closing trial balance is an internal report prepared as the last step in the accounting cycle.

Which of the following statements most accurately describes the purposes of the closing entries?

To establish zero balances in the income statement accounts and to transfer net income into retained earnings

What are the effects on the accounting equation from the adjustment for depreciation?

Total assets will decrease and total stockholders' equity will decrease.

What are the effects on the financial condition of the business from the adjustment for revenues earned, but not yet collected, during the accounting period?

Total assets will increase and total stockholders' equity will increase.

If a company debits Interest Receivable and credits Interest Revenue, it must be recording ______.

amounts earned from its investments but not yet collected

prepaid rent is

an asset and represents rent paid for in advance

The adjusting entry to record the amounts owed for wages incurred during the period includes a ______. (Check all that apply.)

credit to Wages Payable ;debit to Wages Expense

When recording closing entries, temporary accounts with debit balances are ______ and those with credit balances are ______.

credited; debited

The adjusting entry to record the amounts earned during the accounting period results in a(n) _____ to the unearned Revenue account.

decrease, debit, reduction

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

decreased; increased

______ revenues and expenses result because the cash changed hands prior to the revenue being earned or the expense being incurred.

deferred

examples of ______ revenues include magazine subscriptions sold, season tickets sold in advance, airline tickets sold and rent received in advance. (Enter one word per blank.)

deferred

The adjusting entry to record the supplies used during the period will result in a(n) ______.

decrease to Supplies and a increase to Supplies Expense

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

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

Unearned Revenue

liability

In May, Sea the World Cruises, Inc. collected $1,000 cash from a customer for services to be performed in June. Which of the following is true assuming accrual accounting?

$1,000 of revenue should be recorded in June.

In May, Just In Thyme, Inc. billed a customer $1,000 for services performed in May. In June, Just In Thyme collected the $1,000. Which of the following is true assuming accrual accounting?

$1,000 of revenue should be recorded in May.

The general journal, also known as the journal, ______. (Check all that apply.)

- doesn't provide account balances - is where transactions are first recorded - is where the effects of each transaction is recorded chronologically.

Burrows, Inc. borrowed $1,000 on a 12%, 1-year note payable. The amount of interest incurred in one month equals $___

10

Net sales was $10,000,000 for the year. Total assets was $1,100,000 at the end of this year and $900,000 at the beginning of the year. The asset turnover ratio equals ___

10

If Buy & Large, Inc.'s annual depreciation is $1,200, then the amount of depreciation expense on its income statement for the month ended May 31 equals $______

100 Its 1200/12

For a note receivable that was created on November 1, 2018 and is due for repayment on October 31, 2019, what is the time fraction needed to compute interest revenue for the year ended December 31, 2018?

2/12 the total time period for which interest will be accrued and will be credited to the interest income account would be for the period

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

On December 1, Lotsa Space Company received $24,000 from a tenant for 4 months' rent in advance. The entry on December 1, includes a ______. (Check all that apply.)

24,000 debit to cash; 24,000 credit unearned rent revenue.

On January 1, Eons, Inc. purchased a truck for $60,000 and depreciates $10,000 per year. Depreciation expense on the 1st quarter's income statement equals $___

2500

The annual depreciation taken on a vehicle totals $3,000. The vehicle has been in service for 3 full years and the adjusting entries have been completed for the year. At the end of the 3rd year, the annual financial statements will report Depreciation Expense equal to $______and Accumulated Depreciation equal to $___

3000; 9000

On December 1, ABC Apartment Company received $4,800 in advance from a tenant for 3 months' rent, December through February. It credited Unearned Rent Revenue for the full amount. After the adjusting entry is recorded, the Unearned revenue balance at December 31 equals $_____

3200 BUT HOW

For the current year ended, Textable, Inc.'s multi-step income statement reports gross profit of $80,000, operating income of $60,000 and a pretax income of $10,000. Textable's income tax rate is 34%. Income Tax Expense for the year equals $______

3400

On January 1, Squid Roe, Inc. had a supplies balance of $1,500. During the year, it purchased $40,000 of supplies on credit, of which $30,000 was paid. At the end of the year, it had $2,000 of supplies on hand. The amount of Supplies Expense for the year end December 31 equals $

39500

On May 1, Buy & Large, Inc. had a supplies balance of $100. During May, it purchased $500 of supplies on credit. At the end of May, there were $200 of supplies on hand. The amount of Supplies Expense for the month of May equals $

400

Sterling Company paid $1,200 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 contained a debit to Rent Expense in the amount of $ ______and a credit to Prepaid Rent in the amount of $____. The remaining balance in the Prepaid Rent account after the adjustment was $.______

400, 400, 800

Burrows, Inc. borrowed $10,000 on a 6-month note payable at 6% annually. The amount of interest incurred in one month equals $____

50

Depreciation Expense- Accumulated Depreciation-

Accumulated Depreciation- On the balance sheet and reports the amount of asset cost used since the asset began to help generate revenue. ; Depreciation Expense-On the income statement and reports the amount of asset cost used during the current accounting period

Which of the following adjusting entries will increase Net Income and hence may tempt management to misstate the estimated amount? (Select all that apply.)

Adjusting deferred revenues; Adjusting accrued revenues

Which of the following adjusting entries will decrease assets and stockholders' equity? (Check all that apply.)

Adjusting for depreciation on equipment, Adjusting for amounts used that were paid in advance

How does the timing of adjusting entries differ from the accounting for daily transactions? A. Adjustments are made at the discretion of management and are not necessary for each accounting period. B.Adjustments are made at the beginning of the accounting period to ensure accuracy is maintained during the cycle. C.Adjustments are made at the end of the accounting period because making them on a daily basis would be inefficient.

Adjustments are made at the end of the accounting period because making them on a daily basis would be inefficient.

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

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

Why is the Unearned Revenue account reduced during the adjustment process?

As the revenue is earned, it is removed from the Unearned Revenue account and transferred into a revenue account.

ABC Company reports net income of $120,000, net sales of $1,200,000, and average total assets of $960,000. The asset turnover equals ______.

Asset turnover sales divided by average total assets or 1,200,000/ 960,000= 1.25 times

When are adjusting entries recorded?

At the end of the accounting period prior to preparing the financial statements

Adjusting entries are typically recorded ______. (Check all that apply.)

At the end of the accounting period; to ensure revenues and expenses are recorded in the period in which they occur, even though the cash will be collected or paid in a future period

Which financial statement reports the amount of supplies on hand at the end of the accounting period?

Balance sheet

In practice, almost every account, except _____, could require an adjusting entry.

Cash

Identify the impact on the accounting equation of a prepayment of an expense paid in cash.

Cash decreases, prepaid expenses, an asset account, increase

Which of the following entries records the adjustment for income taxes accrued, but not yet paid?

Debit Income Tax Expense and credit Income Taxes Payable

Which of the following entries records the adjustment for interest earned on an investment, but not yet collected?

Debit Interest Receivable and credit Investment Income

Which of the following types of transactions represent deferral adjustments that are recorded to adjust for amounts expired or used during the period? (Select all that apply.)

Decrease to Supplies and increase to Supplies Expense

How do deferral adjustments for prepaid expenses—such as rent—that were initially recorded as assets affect assets and expenses?

Deferral adjustments decrease assets and increase expenses.

Match each type of adjustment with the appropriate description of the adjusting entry required.

Deferred revenues - Adjusted for amounts earned that were collected in advance Adjusted for amounts earned that were collected in advance Accrued revenues- adjusted for amounts earned but not yet collected. Deferred expenses-Adjusted for amounts used that were paid for in advance Accrued expenses- adjusted for amounts incurred but not yet paid.

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.

Chip & Dale, Inc. makes an adjusting entry at the end of the accounting period on investments it owns. As a result, it will show which account on its balance sheet?

Interest receivable

Miss Step, the bookkeeper, forgot to record the adjusting entry for some accrued expenses during the period. This will cause which of the following items on the statement of stockholders' equity to be in error? (Check all that apply.)

Net income will be overstated.;Ending retained earnings will be overstated.

Which balance sheet account would most likely require an adjusting entry to avoid understating liabilities?

Notes Payable Notes Common Stock Reason: Notes Payable incurs interest with the passage of time and, would require an adjusting entry that debits Interest Expense and credits Interest Payable. Unearned Revenue Reason: Although Unearned Revenue most likely requires an adjusting entry to record the amounts earned, the effect of the adjusting entries is to reduce, not increase liabilities. Notes Payable incurs interest with the passage of time and, would require an adjusting entry that debits Interest Expense and credits Interest Payable. Notes Payable Prepaid Expenses Reason: Although Prepaid Expenses most likely require an adjusting entry to record the amounts used, the effect of the adjusting entries is to reduce assets, not increase liabilities. Notes Payable incurs interest with the passage of time and, would require an adjusting entry that debits Interest Expense and credits Interest Payable.

Permanent accounts are found on ______.

Only on the balance sheet, they're categorized as assets, liability, and owners equity account.

How do temporary accounts differ from permanent accounts?

Only temporary accounts are closed at the end of the accounting period.

Which type of adjusting entry may management manipulate and overstate the amount to report a higher net income? (Check all that apply.)

Overstating the amount of accrued revenues; Overstating the amount earned of deferred revenues

Which of the following transactions constitutes an accrual adjustment involving a revenue account?

Revenue earned, but not yet collected, for interest on a note receivable

After adjusting entries have been recorded, select which statements are true regarding supplies. (Select all that apply.)

Supplies on the balance sheet reports the amount of supplies on hand at the end of the accounting period.; Supplies expense on the income statement reports the amount of supplies used during the accounting period.

Miss Step, the bookkeeper, forgot to record the adjusting entry for supplies used during the period. This will cause which of the following on the balance sheet? (Check all that apply.)

Supplies will be overstated.;Current assets will be overstated; Retained earnings will be overstated.

On September 1, Taggert Company paid $1,800 for a 6-month insurance premium beginning September 1. Which of the following statements are correct regarding the accounting for this insurance over the six-month period? (Check all that apply.)

Taggert will debit Prepaid Insurance for $1,800 on Sept. 1., Taggert will credit Prepaid Insurance for $300 on Sept. 30, Taggert will debit Insurance Expense for $300 on Sept. 30.

Which of the following statements is incorrect regarding the need to make accrual adjustments at the end of the accounting period?

The Cash account should be adjusted for the effects of accrued revenues and expenses during the accounting period. Notes Revenues and expenses should be recorded in the period in which they occur, even though the cash will be paid or received in a future period. Reason: The Cash account is adjusted only for errors arising from failing to accurately record cash transactions. The balance sheet accounts related to accrued revenues and expenses are, respectively, Accounts Receivable and Accounts Payable. Since financial statements are prepared at the end of the period, the asset and liability account balances should be brought up to date. Reason: The Cash account is adjusted only for errors arising from failing to accurately record cash transactions. The balance sheet accounts related to accrued revenues and expenses are, respectively, Accounts Receivable and Accounts Payable. Certain events occur over time that would be too tedious and time-consuming to record on a daily basis. Reason: The Cash account is adjusted only for errors arising from failing to accurately record cash transactions. The balance sheet accounts related to accrued revenues and expenses are, respectively, Accounts Receivable and Accounts Payable. The Cash account should be adjusted for the effects of accrued revenues and expenses during the accounting period. Reason: The Cash account is adjusted only for errors arising from failing to accurately record cash transactions. The balance sheet accounts related to accrued revenues and expenses are, respectively, Accounts Receivable and Accounts Payable.

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.

What are the effects on the accounting equation from the adjustment for wages incurred, but not yet paid, during the accounting period?

Total liabilities will increase and total stockholders' equity will decrease.

If there is an error in recording an adjusting entry on the income statement causing Net Income to overstated, then ______. (Check all that apply.)

Total stockholders' equity on the balance sheet will be overstated; Retained Earnings on the statement of stockholders' equity will be overstated

Miss Step, the bookkeeper, forgot to record the adjusting entry for supplies used during the period. This will cause which of the following items on the statement of stockholders' equity to be overstated? (Check all that apply.)

Total stockholders' equity;Net income; Ending retained earnings

True or false: The adjusting entry to record depreciation does not directly reduce the noncurrent asset accounts, such as Equipment, so that the original cost of the asset remains unchanged.

True

Turnovers & Buns Bakery's total asset turnover ratio is 4.0, and On-a-Roll's total asset turnover ratio is 2.0. Which of the following statements is true?

Turnovers & Buns appears to be more efficient in using its long-lived tangible assets to generate revenues.

Identify which companies would report deferred revenues that would need to be adjusted at the end of the accounting period.

a gym that requires a three-month prepayment of membership fees, an airline that sells tickets online, an insurance company collects one year's premium from customers in advance

Adjusting entries include _______ adjustments for revenues earned but not yet collected and expenses incurred but not yet paid. They also include ____adjustments for revenues earned that were collected in advance and expenses incurred that were previously recorded as assets.

accrual and deferral

______ adjustments are used when cash has not been exchanged in a prior transaction, and ________adjustments are used when cash has been exchanged in a prior transaction. (Enter one word per blank.)

accrual; deferral

adjustments involve adjusting entries where the revenue has been earned or the expense has been incurred, and the cash will be collected or paid in the future

accrued

When recording an adjustment for the use of equipment during the current accounting period, which two accounts are affected?

accumulated depreciation and depreciation expense

Income tax expense is recorded ______.

after all other adjusting entries are recorded for the period

The adjusting entry for income taxes owed at the end of the accounting period must be recorded ______. (Select all that apply.)

after all other adjusting entries have been recorded; using the adjusted pretax income; by increasing the Income Taxes Payable account

After the adjustments have been recorded, the adjusted balance in the Prepaid Rent account represents the ______.

amount of the prepayment that remains towards future rental periods

Adjustments ensure that ______ balances are reported at amounts representing the economic benefits that remain at the end of the period and will be used-up in future periods.

asset notes account Reason: Not all accounts, just the asset accounts, are reported at amounts representing economic benefits that remain at the end of the period. liability Reason: Liabilities represent economic obligations, not benefits. asset revenue Reason: Revenues represent amounts earned during the period. Assets represent economic benefits that remain at the end of the period. expense Reason: Expenses represent the economic benefits used during the period. Assets represent the economic benefits that remain at the end of the period

Interest Receivable is a(n) ______.

asset that represents the right to collect interest

If the adjusting entry to record supplies used during the period is not recorded, then ______.

assets and stockholders' equity will be overstated

If the adjusting entry to accrue interest of $1,000 on a note receivable is omitted, then ______.

assets, net income, and stockholders' equity are understated by $1,000

Which financial statement reports the amount of prepaid expenses remaining at the end of the accounting period?

balance sheet

Prepaid expenses appear on the ______.

balance sheet as an asset

The adjusted trial balance should be prepared ______ the financial statements are prepared to prove the ______ of the debits and credits.

before; equality

The adjusted trial balance should be prepared ______the financial statements are prepared in order to prove the______of the debits and credits. (Enter one word per blank.)

before; equality

Noncurrent assets, such as equipment, are reported at their ______ value on the balance sheet.

carrying

Adjusting entries never affect the asset account called ____

cash

Which account would never be affected by an adjusting entry recorded at the end of an accounting period?

cash

After the adjustments have been completed, the balance in the Rent Expense account represents the ______.

cost of rent for the accounting period

On May 1, Buy & Large, Inc. had a supplies balance of $100. During May, it purchased $500 of supplies on credit. At the end of May, there were $200 of supplies on hand. The entry to record the adjusting entry for supplies used during the period includes: (select all that apply)

credit Supplies for $400, debit supplies of 400

The adjusting entry to record depreciation on equipment includes a ______. (Check all that apply.)

credit to Accumulated Depreciation, debit to Depreciation Expense

The adjusting entry for interest earned on a note receivable includes a ______. (Check all that apply.)

credit to Investment Income and debit to Interest Receivable

A closing entry may include a ______.

credit to Wages Expense

The adjusting entry to record interest owed on notes payable includes ______. (Select all that apply.)

debit Interest Expense; credit Interest Payable

Which action will be taken in the adjusting entry to record rent expense that has expired during the month? (Assume that the rent was paid in advance and previously recorded as an asset.)

debit and rent expense

The entry to record income tax accrued, but unpaid, at the end of the accounting period includes both a ______ and a ______. (Check all that apply.)

debit to Income Tax Expense; credit to Income Taxes Payable

On November 1, Movers, Inc. paid $24,000 for 2 years' rent beginning on November 1 (assume rent is the same amount each month). The entry to record this transaction requires a ______. (Select all that apply.)

debit to Prepaid Rent of $24,000, credit to Cash of $24,000

The adjusting entry to record the amount of revenue earned that had been collected in advance requires a(n) ______ (debit/credit) to Unearned Revenue and a(n) ________(debit/credit) to Sales Revenue. (Enter one word per blank.)

debit; credit

During the closing process, the closing entry to reduce the sales revenue normal account balance to zero requires the revenue account be _____ (debited or credited)

debited- since revenues increase w a credit entry and therefore, contain a normal credit balance, accounts must be debited to reduce the balance.

The closing process requires ______. (Check all that apply.)

debiting retained earnings when there is a net loss; crediting retained earnings when revenues are greater than expenses; debiting the revenue accounts; crediting the expense accounts

Balance sheet accounts, such as Supplies or Prepaid rent, _________ (increase/decrease) as a result of deferral adjustments. (Enter one word per blank.)

decrease

The effect of the adjusting entries for supplies and deferred expenses is to ______.

decrease assets and stockholders' equity

The adjusting entry to record the amount earned that previously had been collected in advance will ______.

decrease liabilities and increase revenues

Adjusting entries for ______ revenues and expenses are necessary when the cash was collected or paid in advance. Adjusting entries for ______ revenues and expenses are necessary when the earning of revenues and incurring of expenses occurred prior to the cash changing hands.

deferred; accrued

____ is the process of allocating the cost of buildings, vehicles, and equipment to expense over time as they are used. (Enter one word per blank.)

depreciation

After the adjustments have been completed for the fiscal year, the adjusted balance in the Depreciation Expense account represents the ______.

depreciation for the current fiscal year

The asset turnover ratio measures the ______.

dollars of sales generated for each dollar invested in assets

Adjustments help to ensure that all revenues are recorded in the period in which they are ______

earned, made, accrued, generated, recognized, or realized

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. (Enter one word per blank.)

expense

Interest Expense is a(n) ______.

expense on the income statement and reports the cost of using borrowed funds during the period

Income Tax Expense is a(n) ______.

expense on the income statement and reports the income tax incurred for the period, paid and/or unpaid

The adjusting entry to record interest owed on obligations at the end of the accounting period includes a debit to "Interest ____" a credit to "Interest_____"

expense; payable

A deferral adjusting entry that adjusts assets (such as Prepaid Insurance) ______.

expenses the amount used during the period

In the closing process, the closing entry zeros out each _____account by crediting it and zeros out each _____account by debiting it, and records the difference in retained earnings. (Enter only one word per blank.)

expenses; revenue

True or false: Since Retained Earnings is involved in the closing process, it is considered a temporary account.

false Reason: Although Retained Earnings is involved in the closing process, it is a permanent, not a temporary, account.

Net income (or loss) is recorded in the retained earnings account when _____ and _____accounts are closed and transferred into retained earnings. (Enter one word per blank.)

revenue; expense

True or false: When referring to supplies, the term "on hand" refers to supplies that have been used up during the accounting period.

false Reason: The term "on hand" refers to the supplies that the company still owns (i.e. has in its possession). The amount of supplies used during the period can be determined by subtracting the supplies "on hand" from the supplies previously purchased by the

True or false: To calculate a company's income tax obligation, the income after tax is multiplied by the company's tax rate.

false- Reason: The income before (not after) tax is multiplied by the company's tax rate.

True or false: Wages Receivable is the account used to record wages owed to employees for work performed during the current period.

false- Reason: The word "Receivable" denotes an asset and indicates that cash will be received in the future. Wages owed to employees represent a liability because cash will need to be paid to employees in the future. The correct account is Wages Payable.

True or false: Accumulated Depreciation is a contra-account to a noncurrent asset account, such as Equipment. This means that it increases the balance of the noncurrent asset on the balance sheet.

false; Reason: A contra-account is a negative account. It carries the opposite balance of the account with which it is paired. Consequently, Accumulated Depreciation reduces the noncurrent asset when portrayed on the balance sheet.

The effect of journal entries on each account is summarized in the ______.

general ledger; Notes general journal Reason: The effects of journal entries are copied from the general journal to the general ledger. Each account's balance in the ledger is summarized in the ledger. income statement Reason: The general ledger is the formal record for summarizing the effects of journal entries. balance sheet Reason: The effects of journal entries are copied from the journal to the general ledger. Each account's balance in the ledger is summarized in the ledger.

If a company determines that it has $1,400 of supplies on hand at the end of the period, which of the following statements is correct? The company ______.

has $1,400 in supplies remaining at the end of the period

The adjustment for supplies used during the period will result in a(n) ______ to the Supplies Expense account.

increase

After the adjustments have been completed, the adjusted balance in the Interest Payable account represents ______.

interest that has accrued, but has not been paid, at the end of the period

___is defined as the "cost of borrowing money." Since the account represents a cost incurred on borrowed money, it is classified as a(n) _____ account under stockholders equity

interest; expense

Miss Take, the accountant, forgot to record the interest owed at the end of the accounting period. As a result of this error, ______. (Select all that apply.)

liabilities will be understated; stockholders' equity will be overstated

Interest Payable is a(n) ______.

liability on the balance sheet and reports the unpaid cost of using borrowed funds

Assets are listed in order of ______ and liabilities are in order of ______ on the balance sheet

liquid; due dates

Property and equipment, net is reported on the balance sheet at the ______.

netbook value

After the adjustments have been completed, the Supplies account on the balance sheet represents the cost of supplies ______.

on hand at the end of the accounting period

If no adjusting entries were recorded for the use of supplies, prepaid expenses and equipment, then assets would be ______.

overstated

After the adjustments have been completed, the adjusted balance in the payable account represents the amount ____ at the end of the accounting period. (Enter only one word per blank.)

owed

The adjusting entry for income taxes records income tax that is incurred and ____ by the company

owed

After the adjustments have been completed, the adjusted balance in the "Accrued Expenses Payable" or "Wages Payable" account represents amounts incurred, but not yet___ by the company

paid

Wages Payable is adjusted for wages earned, but not yet _____ to employees, at the end of the accounting period. (enter one word per blank.)

paid

In accrual accounting, to defer means to _______ , recording the other side of the cash transaction as a revenue or expense. Instead the other side of the cash entry is recorded as liability or prepaid. (Enter one word per blank.)

postpone

Select all accounts on an unadjusted trial balance that may require an adjusting entry. (Select all that apply.)

prepaid expenses, unearned revenue, and supplies

Adjustments made to expense accounts at the end of the accounting period adhere to the ______ principle

recognition

retained earnings net income dividends supplies supplies expense

retained earnings- Both the statement of stockholders' equity and the balance sheet Net income- Both the income statement and the statement of stockholders' equity Dividends- The statement of stockholders' equity supplies- The balance sheet Supplies expense- The income

Miss Hap, the bookkeeper, forgot to record the depreciation for the year. This error will cause ______. (Check all that apply.)

stockholders' equity to be overstated, assets to be overstated

Miss Hap, the company's accountant, forgot to make the adjusting entry to record the amount of prepaid expenses used during the period. As a result ______. (Select all that apply.)

stockholders' equity will be overstated, assets will be overstated

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

temporary

_____ accounts are closed to $0 balances at the end of the accounting period.______account balances carry forward to the next accounting period. (Enter only one word per blank.)

temporary; permanent

The adjusting entry to record accrued expenses requires debiting ______.

the expense accounts and crediting the related payable accounts

In a deferral adjustment for revenues collected in advance that are now earned, ______.

the liability recorded when cash was received is decreased by the adjustment for the revenue being earned

After the adjustments have been recorded, Unearned Revenue on the balance sheet reports the amount of ______.

the sales or services still owed to the customer

The 3 variables needed to calculate interest are the ______. (Check all that apply.)

time period covered in the interest calculation, principal, annual interest rate

After the adjustments have been completed, the adjusted balance in the Accumulated Depreciation account represents the ______

total depreciation taken on the long-lived assets since their purchase

After the adjustments have been completed, the adjusted balance in the Income Tax Expense account represents ______.

total income tax that has been paid or accrued during the period

After the adjustments have been completed, the adjusted balance in the Interest Expense account represents ______.

total interest that has been paid or accrued during the period

The adjusting entry for income tax expense accrued, but not paid, at the end of the accounting period causes ______. (Check all that apply.)

total liabilities to increase; total stockholders' equity to decrease

True or false: The adjusting entry to record depreciation does not directly reduce the noncurrent asset accounts, such as Equipment, so that the original cost of the asset remains unchanged.

true

True or false: After the closing entries have been posted, the new balance in the retained earnings account will equal the retained earnings reported on the balance sheet.

true- Reason: The amount on the balance sheet was taken from the statement of retained earnings. The statement of retained earnings had added net income and subtracted dividends to the beginning retained earnings balance. This calculation summarizes the effects of the closing entries on the retained earnings account.

Amounts collected in advance of being earned are recorded as _______. (Select all that apply.)

unearned revenue, deferred revenue, and a liability

After the adjustments have been completed, the adjusted balance in the Supplies Expense account represents the cost of supplies ______.

used during the accounting period

Deferring a revenue or expense account in accounting means that the amount ______.

will be reported as a revenue or an expense in a later period