ACC 201 exam two (chp 4,6,7)

Accumulated Depreciation has a normal ____ balance which indicates that it ____ Total Assets

Credit decreases

During the closing process, the closing entry to reduce the sales revenue normal account balance to zero requires the revenue account be _____.

Debited

Deferral or Accrual? Decrease to Prepaid Insurance and Increase to Insurance Expense

Deferral

Deferral or Accrual? Decrease to Supplies and Increase to Supplies expense

Deferral

What accounts need to be adjusted, if any, when there is an unadjusted balance in Unearned Revenue for $5,600 for unredeemed gift cards and $3,200 worth of gift cards were redeemed during the month and not yet recorded.

Sales Revenue needs to be increased by $3,200 Unearned Revenue needs to be decreased by $3,200

Supplies are recorded as a(n) ___ when purchased.

asset

The adjusting entry to record depreciation on equipment includes a _____

debit to Depreciation Expense Credit to Accumulated Depreciation

Prepaid expenses should be ____ by the benefits that were used up during the accounting period.

decreased

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

earned

A deferral adjusting entry that adjusts the assets (such as prepaids and supplies) _____.

expenses the amount used during the period

Deferral or Accrual? Increase to Interest Receivable and Increase to Interest Revenue

Accrual

Deferral or Accrual? Increase to Wages Payable and Increase to Wages Expense

Accrual

What is the impact of declaring and paying a dividend on the financial condition of a company.

Both assets and stockholders' equity will decrease

When should supplies be recorded as an expense?

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

What is the purpose of the adjusted trial balance?

To ensure that total debits equal total credits after the adjustments have been recorded

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

allocated to future accounting periods based on the value of the benefit used during the period

What entries are needed for the closing process?

-Credit Dividends Declared and debit Retained Earnings - Debit each revenue, credit each expense, and record the difference in Retained Earnings.

Why is an adjustment necessary for interest accrued on a note payable at the end of the period if the interest will not be paid until the note is due?

-The adjustment is needed to accurately portray the interest liability of the company, all amounts owed should be reported on the balance sheet -Even though the interest will not be paid until a future period, the expense was actually incurred during the current accounting period

What are the steps in the adjustment process at the end of the accounting period

1. using the unadjusted trial balance, determine the accounts requiring adjustment 2. Record the adjusting entries in the journal 3. Post the adjusting journal entries to the T-accounts 4. Prepare an adjusted trial balance to check the equality of the debits and credits

What are the steps that need to be taken at the end of the accounting period to complete the financial statement preparation process?

1.prepare the adjusting entries 2. prepare the adjusting trial balance 3. Prepare the financial statements 4. Prepare the closing entries

How do accrual adjustments affect liabilities and expenses?

Accrual adjustments can increase liabilities and increase expenses.

How does the timing of adjusting entries differ from the accounting for daily transactions?

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

Adjustments made to expense accounts at the end of the accounting period adhere to the ___ recognition (matching) principle

Expense

The adjusting entry to record wages owed to employees at the end of the accounting period includes a debit to "Wages _____" and a credit to "Wages____".

Expense Payable

The ____ recognition principle requires that a portion of long-lived assets be transferred to an expense account during the accounting period the asset is being used to generate revenues.

Matching

T/F: The adjusting entry to record depreciation does not directly reduce the long-lived asset accounts, such as Equipment, so that the original cost of the asset remains uncharged.

True

T/F: The balance in the "Interest Expense" account and the balance in the "Interest Payable" account may be different after the adjustments are posted.

True

What is a good starting point for determining which accounts require adjustment?

Unadjusted trial balance

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

increase

The Accounts Receivable account should be _____ when adjusting at the end of the period fro any revenues that have been earned but not yet collected or recorded.

increased

After the adjustments have been completed, the adjusted balance in Income Tax Payable represents the amount ___ to the government at the end of the accounting period

owed

Net income (or loss) is recorded in the retained earnings account when ____ and ___ accounts are closed and transferred into retained earnings.

revenue expense