ACC 210 module 3
Deferred revenue is a(n) ---
liability
On November 1, 2022, Movers, Inc., paid $24,000 for 2 years' rent beginning on November 1. The Prepaid rent balance at December 31, 2022 equals
22,000
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 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.
--- is an allocation of the cost of buildings, vehicles, and equipment to expense over time as they are used.
Depreciation
When should supplies be recorded as an expense?
In the period the supplies are used, regardless of when they were purchased
--- occur when the cash flow occurs after either the expense is incurred or the revenue is earned.
accruals
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
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
Under the accrual basis of accounting, costs used to generate revenue are recorded as expenses:
in the same period as related revenue.
The adjusting entry for a deferred revenue includes a debit to a(n) --- account and a credit to a(n) -- account
liability, revenue
At year-end, companies that utilize accrual-based accounting systems complete the measurement process through
recording of adjusting entries
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.
Adjusting entries:
update the accounts to their proper balances. are needed before financial statement preparation.
The adjusting entry for prepaid rent requires a(n) --- to Rent Expense and a(n)
increase; decrease
How do adjusting entries for accrued expenses affect liabilities and expenses?
Adjusting entries for accrued expenses can increase liabilities and increase expenses.
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.
How do temporary accounts differ from permanent accounts?
Only temporary accounts are cleared out at the end of the accounting period.
On November 1, 2022, Movers, Inc., paid $24,000 for 2 years' rent beginning on November 1 (assume rent is the same amount each month). Movers' year-end financial statements as of December 31, 2022 will show:
Prepaid rent of $22,000 Rent expense of $2,000
Which of the following transactions would normally be recorded as an asset when cash is paid?
Rent paid in advance
Which of the following statements regarding the statement of cash flows are correct?
Reports cash receipts The final financial statement that is typically prepared Reports cash disbursements
Which of the following financial statements typically is prepared last?
Statement of cash flows
The adjusting entry for an accrued revenue always includes
a debit to asset account a credit to a revenue account
To complete the measurement process, companies need to update balances of assets, liabilities, revenues and expenses for changes created by -- entries
adjusting
Revenue in the income statement for the year ended December 31, 2021 equals the:
amount earned by selling goods or services to customers during 2021.
After the adjusting entries have been completed, the adjusted balance in the Prepaid Rent account represents the ---
amount of the prepayment that remains towards future rental periods
Adjusting entries ensure that ---- balances are reported at amounts representing the economic benefits that remain at the end of the period.
asset
Reporting revenues only when cash is received and expenses only when cash is paid is called --the basis of accounting.
cash
The entries that transfer the balances of all temporary accounts to retained earnings are referred to as
closing entries
Depreciation is an allocation of the --- of buildings, vehicles, and equipment to expense over time as they are used.
cost
On July 1, Book Palace prepaid 12 months' fire insurance with coverage starting the following month. The adjusting entry on December 31 includes:
credit to Prepaid Insurance debit to Insurance Expense
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
An adjusting entry for accrued expenses involves:
credit to a liability debit to an expense
The adjusting entry for prepaid rent requires a(n) --- to rent expense and a(n) --- to prepaid rent
debit, credit
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 adjusting entry for a prepaid expense includes a debit to a(n) --- account and a credit to a(n) --- account.
expense; asset
True or false: Adjusting entries ensure that assets in the balance sheet are reported at amounts that have been used up or expired during the period.
false
A classified balance sheet Blank______.
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:
has already been incurred
--- is defined as the "cost of borrowing money."
intrest
The expense that relates to a formal note payable and accumulates or accrues throughout the accounting period is referred to as -- expense
intrest
Adjusting entries for accrued expenses ensure that liabilities are reported for all amounts ______ at the end of the accounting period.
owed
-- is the amount earned from selling goods or services to customers.
revenue
Closing entries move the balances from the ______ accounts into the Retained Earnings account.
temporary
There is a cause-and-effect relationship between revenues and expenses that dictates
when costs are recognized as expenses in the income statement.
Which of the following would be referred to as "accruals?"
Goods and services provided, not yet collected Expenses incurred, not yet paid
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?
Statement of stockholders' equity
Taggert Company paid $1,800 for a 6-month insurance premium on December 1. Which of the following statements are correct regarding the accounting for this insurance over the six-month period?
Taggert will credit Prepaid Insurance for $300 on Dec. 31. Taggert will debit Insurance Expense for $300 on Dec. 31. Taggert will debit Prepaid Insurance for $1,800 on Dec. 1.
At the beginning of the accounting period, the balances of temporary accounts
are zero
A prepayment such as "Prepaid Insurance" is originally recorded as a(n) --- when an insurance policy is purchased and will later be expensed in the period used.
asset
Adjusting entries ensure that Blank______ balances are reported at amounts representing the economic benefits that remain at the end of the period.
asset
Prepaid insurance is a(n)
asset in the balance sheet
A classified balance sheet shows subtotals for current -- and current --
asset, liabilities
After the adjusting entries have been completed, the balance in the Rent Expense account represents the:
cost of rent for the accounting period
Andy records an adjusting entry for deferred revenue. Andy should:
debit a liability account credit a revenue account
Prepaid expenses should be --- by the cost of the asset used during the accounting period.
decreased
The statement of stockholders' equity includes these amounts:
dividends for the period net income ending balance retained earnings
Consistent with accrual-basis accounting, expenses should be recognized
in the period when the related revenue is generated
Revenues and expenses are reported in the:
income statement
The two major categories reported in the income statement are:
revenue expense
Under cash-basis accounting
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 Supplies Expense account represents the cost of supplies:
used during the accounting period
Which of the following statements is correct regarding the adjusting entry to record interest accrued on a note payable?
Interest on the note payable is classified as an expense since it is a cost of borrowing.
Adjusting entries help to ensure that all -- are recorded in the period in which they are incurred.
expenses