ACC 111 - Ch 3

Given that a company reported net income for the year, determine how a company would complete its work sheet for the period by choosing the correct statement below.

The company would add the net income amount to the Credit column of the Balance Sheet & Owner's Equity columns of a work sheet.

Which of the following statements describes the expense recognition (matching) principle?

-Expenses should be matched in the same accounting period as the revenues that are earned as a result of those expenses. -Matching of expenses with revenues is a major part of the adjusting process.

Which of the following statements is (are) correct about completing a work sheet?

-If a net income occurs, it is added to the Debit column of the Income Statement. -If a loss occurs, it is added to the Debit column of the Balance Sheet. -Adding net income to the Credit column of the Balance Sheet & Owner's Equity columns implies that it is to be added to Owner, Capital. -If a net income occurs, it is added to the Credit column of the Balance Sheet.

Trial balance

A list of accounts and their balances at a point in time.

Accounts Receivable

Amounts to be received in the future due to the sale of goods or services

Describe an unclassified balance sheet.

An unclassified balance sheet is one whose items are broadly grouped into assets, liabilities, and equity.

Which of the following accounts would be sorted from the Adjusted Trial Balance of a work sheet to the Balance Sheet & Statement of Owner's Equity columns on a work sheet?

Cash; Accounts payable; Owner, Withdrawals

Define "current" as it applies to assets and liabilities on a classified balance sheet.

Current items are those expected to come due within one year or the company's operating cycle, whichever is longer.

Which of the following is correct regarding a work sheet?

Each set of column totals must balance on the Trial Balance columns, Adjustments columns and the Adjusted Trial Balance columns.

What is a work sheet?

It can help with adjusting and closing accounts and with preparing financial statements.

A plant asset can be defined by which of the following statements?

Its original cost (minus any salvage value) is gradually expensed over its useful life. It is a tangible long-term asset. It is reported on the balance sheet. Provide benefits for greater than one period

Balance sheet

Reports a business's assets, liabilities and equity on a specific date.

Unearned revenue

The liability created by receiving revenue in advance.

Which of the following lists contains only temporary accounts?

Wages Expense; Income Summary; Owner, Withdrawals

Which of the accounts below are considered accrued expenses?

Wages expense, interest expense

Which of the statements below describe(s) a temporary account?

-A temporary account has a balance for only one period. -A temporary account is closed at the end of an accounting period.

Review the following statements and select the ones that are correct regarding sorting accounts from the Adjusted Trial Balance columns of a work sheet to the Income Statement and Balance Sheet columns in order to prepare for our last step of completing the worksheet. (Check all that apply.)

-Liabilities go to the Balance Sheet & Statement of Owner's Equity Credit column. -Expense accounts go to the Income Statement Debit column. -Owner, Withdrawals go to the Balance Sheet & Statement of Owner's Equity Debit column.

McDarrel's records $500 of accrued salaries on December 31. Three days later, on January 3, total salaries of $4,000 (including the $500 accrued at year end) are paid. Demonstrate the required journal entry on January 3 by selecting from the choices below. (Check all that apply.)

-Salaries expense would be debited for $3,500. -Cash would be credited for $4,000. -Salaries payable will be debited for $500.

CH 4

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What is a plant asset?

A plant asset refers to a long-term tangible asset used to produce and sell products or services.

Work sheet

A useful tool in working with accounting information.

What is keying?

Adding an identifying letter to link the debit and the credit of an adjustment in the Adjustments columns

Which of the following statements is correct regarding a work sheet and the adjustment process?

Adjusting journal entries are prepared from the Adjustments columns of a work sheet.

When does the closing process take place?

At the end of an accounting period

On December 28, I. M. Greasy, Catering completed $600 of catering services. As of December 31, the customer had not been billed nor had the transaction been recorded. Demonstrate the required adjusting entry by choosing the correct statement below. Multiple choice question.

Debit Accounts receivable for $600.

A company borrowed $4,000 from the bank at an interest rate of 9%. By the end of the accounting period, the loan had been outstanding for 30 days. Demonstrate the required adjusting entry by choosing the correct statement below.

Debit Interest expense for $30.

By the end of the accounting period, employees have earned salaries of $500, but they will not be paid until the following pay period. Which of the following is the proper adjusting entry?

Debit Salaries expense for $500.

Select the statement below that describes a post-closing trial balance.

It is a listing of all permanent accounts and their balances after closing.

Statement of cash flows

Reports the inflows and outflows of cash during a period of time.

After an adjusted trial balance is prepared, what is the next step in completing the work sheet used in preparing financial statements?

Sort adjusted trial balance amounts to the financial statement columns.

$800 of supplies were purchased at the beginning of the month and the Supplies account was increased. As of the end of the period, $200 of supplies still remain. Which of the following is the correct adjusting entry?

Supplies expense would be debited for $600.

The Supplies account in the Unadjusted Trial Balance columns has a debit balance of $4,000. There is a $1,500 credit adjustment in the Adjustments columns across from the Supplies account. Describe how to compute the Supplies account balance on the Adjusted Trial Balance.

The $1,500 credit adjustment would be subtracted from the $4,000 debit balance in the Unadjusted Trial Balance.

The revenue recognition principle states that revenue:

should be recorded when goods or services are provided to customers at an amount expected to be received from them

Select the statement(s) below which correctly describe how to use the work sheet in the adjustment process.

-Journalizing and posting adjusting entries is required after adjustments are entered in a work sheet. -Information from the Adjustments columns are used for the adjusting journal entries.

Which of the following could be a logical or realistic accounting period for a business that is creating financial statements?

-Six-month period -One-month period -One-year period

Explain how to add adjustments to a work sheet when more than one adjustment is required

-The adjustment can be added to a blank line. -The adjustment can be squeezed in on one line. -The adjustment can be combined into one adjustment amount.

Which of the following is (are) true regarding timeliness and the importance of periodic reporting?

-The value of information is often linked to its timeliness -Businesses report financial information at regular intervals to ensure timeliness of data -Useful information must reach decision makers frequently

what an accrued expense

-They refer to costs that are incurred in a period, but are both unpaid and unrecorded. -Adjustments involve increasing both an expense and a liability account. -They are reported on an income statement. Examples of accrued expenses are wages expense and interest expense.

Recall the column headings of a work sheet used to prepare financial statements. Which of the following items would be seen on such a worksheet.

-Unadjusted Trial Balance columns -Balance Sheet columns -Adjusted Trial Balance columns -Income Statement columns -Adjustment columns

Accrual basis accounting is defined as

-an accounting system that uses the matching principle to determine when to recognize revenues and expenses. -an accounting system that uses the adjusting process to recognize revenues when earned and expenses when incurred.

Accrual basis accounting recognizes (equity/revenues/expenses) when the service or product is delivered and records (revenues/expenses/liabilities) when (incurred/paid) in order to adhere to the matching principle.

-revenues -expenses -incurred

Explain the required steps to complete a work sheet by placing the following in the correct order of completion. (Put the first step at the top.)

1. Enter unadjusted trial balance 2. Enter adjustments. 3. Prepare adjusted trial balance 4. Sort (adjusted) trial balance amounts to financial statements 5. Total financial statement columns and compute net income or net loss and add to the balance sheet columns.

Some of the steps in the accounting cycle are listed below. Place them in the correct order of use.

1. Journalize transactions into the journal 2. Journalize and post the adjusting entries 3. Prepare the adjusted trial balance 4. Prepare the financial statement 5. Journalize and post closing entries 6. Prepare post-closing trial balance

How can you add multiple adjustments to one account in a work sheet?

A new line can be added.

Sheldon Company had $500 for one day of accrued salaries on December 31 of the prior year. On January 4 of the current year, total salaries for the five-day week are paid. The journal entry to record the payment of salaries on January 4 includes:

Debit to Salaries Payable for $500; Debit to Salaries Expense for $2,000

Select the statements below that describe the purpose of a post-closing trial balance.

One purpose is to verify that total debits equal total credit for permanent accounts. One purpose is to verify that all temporary accounts have zero balances.

Income statement

Reports a business's revenues and expenses for a period of time.

Which of the following statements correctly summarizes how to compute net loss or net income using a work sheet?

Which of the following statements correctly summarizes how to compute net loss or net income using a work sheet?