week 3

Which of the following line items appear in an income statement?

Sales Revenue Salaries Expense

Consistent with the ______-basis of accounting, we record revenue when we provide goods and services to customers, and we record expenses in the period that costs are used to provide those goods and services.

accrual, accural, accrued, or acrual

Revenue in the income statement for the year ended December 31, 2018 equals the ______.

amount earned by selling goods or services to customers during 2018

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

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

The post-closing trial balance checks that total ___ equal total____ at the end of the period.

Blank 1: debits, total debits, debit, or temporary Blank 2: credits, total credits, credit, or zero

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?

Dec 31

Which of the following statements is correct regarding the adjusting entry to record interest accrued on a note payable? Multiple choice question. Interest on the note payable is classified as a revenue since it is an amount that can be earned on investments. Interest on a note payable should be credited to Notes Payable because it increases the amount of principal to be repaid at the maturity of the note. Interest on the note payable is classified as an expense since it is a cost of borrowing. Interest on the note payable will not accumulate because it is paid at the end of each year.

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

Reporting revenues only when cash is received and expenses only when cash is paid is called the _____ basis of accounting. (Enter one word per blank.)

cash

Adjusting entries for accrued expenses ensure that liabilities are reported for all amounts ______ at the end of the accounting period.

owed

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

recording of adjusting 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, Unearned, or Deffered

Adjusting entries are made at the of the _____ accounting period, while daily transactions are made throughout the accounting period.

end, closing, or close

Select all that apply Which of the following transactions are examples of prepayments that will require an adjustment at the end of the accounting period on December 31? (Select all that apply.) Multiple select question. A company records interest expense that has accrued, but will not be paid until next year. A company pays a utility bill for charges incurred in the previous month. 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 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.

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.

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

Blank 1: liability or liabilities Blank 2: revenue

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

Interest

The adjusting entry for an accrued revenue always includes: (Select all that apply.) Multiple select question. a debit to an asset account a debit to a liability account a debit to a revenue account a credit to an asset account a credit to a revenue account

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

Costs of assets acquired in one period that will be recorded as expense in a future period are referred to as ______ and are initially recorded as _____.

prepaid expenses; assets

In the closing process, ______ are zeroed out by crediting each account and ______ are zeroed out by debiting each account.

expenses and dividends; revenues

Supplies should be ______ and Supplies Expense should be ______ for the cost of supplies used up during the period. Multiple choice question. increased; decreased decreased; increased decreased; decreased increased; increased

decreased; increased

Temporary accounts are found in:

income statement

When a company records an adjusting entry for services previously recorded as Deferred Revenue, it records which two of the following?

credit to Revenue debit to Deferred Revenue

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

expenses

The primary components of net income are: Multiple select question. stockholders' equity dividends revenues expenses retained earnings

revenues expenses

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

adjusting, adjusted, adjust, or adjustment

How do adjusting entries for accrued expenses affect liabilities and expenses?

Adjusting entries for accrued expenses can increase liabilities and increase expenses.

When should supplies be recorded as an expense?

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

When should supplies be recorded as an expense? Multiple choice question. In the period cash is paid for the supplies, regardless of when the supplies were received In the period the supplies are purchased, regardless of when cash is paid In the period the supplies are used, regardless of when they were purchased

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

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

Interest

Which of the following pre-payments requires an adjusting entry at the end of the year? Multiple choice question. On November 1, the company pays rent for the next six months. On December 20, the company pays its liability insurance; coverage starts January 1. On December 31, the company pays next year's fire insurance.

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

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

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

Select all that apply Adjusting entries: (Select all that apply.) Multiple select question. are needed before financial statement preparation. are required in cash-basis accounting only. are prepared at the beginning of the period. update the accounts to their proper balances.

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

Prepaid insurance is a(n) ______. Multiple choice question. asset in the balance sheet expense in the balance sheet expense in the income statement liability in the balance sheet

asset in the balance sheet

Prepaid rent appears in the ______. Multiple choice question. balance sheet because it is an asset balance sheet because it is a stockholders' equity account income statement because it is an expense balance sheet because it is a liability income statement because it is an asset

balance sheet because it is an asset

During the year, Smite Company declared and paid dividends in the amount of $50,000. As part of the closing process, Smite should Multiple choice question. debit dividends and credit retained earnings no journal entry is necessary as dividends have already been recognized debit retained earnings and credit dividends

debit retained earnings and credit dividends

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

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

depreciation.

Temporary accounts include ______, ______, and ______. Multiple select question. dividends expenses revenues cash retained earnings

dividends expenses revenues

Identify the entries needed for the closing process. Multiple select question. Debit Dividends Declared and credit Retained Earnings. Credit each revenue, debit each expense, and record the difference in Retained Earnings. Credit Dividends Declared and debit Retained Earnings. Debit each revenue, credit each expense, and record the difference in Retained Earnings.

expenses beginning balance retained earnings revenues dividends declared

Select all that apply Under cash-basis accounting, (Select all that apply.) Multiple select question. expenses are recorded when cash is paid. revenues are recorded when goods or services are provided. expenses are recorded in the period related revenue is generated. revenues are recorded when cash is received.

expenses are recorded when cash is paid. revenues are recorded when cash is received.

A classified balance sheet ______.

groups asset and liabilities into current and long-term categories

An adjusting entry is necessary to record interest expense at year-end because the interest: Multiple choice question. has already been incurred is earned by the company is a material business expense is due at the beginning of the following period

has already been incurred

Adam Corporation uses the cash-basis of accounting. Adam Corporation should record expenses when: Multiple choice question. paid the related revenue are recognized incurred, regardless of when it is paid

paid

Which of the following would be included (added or subtracted) in the calculation of retained earnings? (Select all that apply.)

revenues dividends declared beginning balance retained earnings expenses

Under cash-basis accounting, (Select all that apply.) Multiple select question. revenues are recorded when goods or services are provided. revenues are recorded when cash is received. expenses are recorded in the period related revenue is generated. expenses are recorded when cash is paid.

revenues are recorded when cash is received. expenses are recorded when cash is paid.

After the adjusting entries have been completed, the adjusted balance in the Deferred Revenue account represents: Multiple choice question. the amount of revenues for which goods or services were provided during the current period. the amount of revenues for which goods or services were provided during the current period, but not collected during the period. the amount of the sales or services still owed to the customer.

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

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

Depreciation

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

closing entries

After the adjusting entries have been completed, the adjusted balance in the Supplies Expense account represents the cost of supplies: Multiple choice question. on hand at the end of the accounting period purchased, but not yet paid for, at the end of the accounting period purchased during the accounting period used during the accounting period

used during the accounting period