Accounting Smartbook 3

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

Andy records an adjusting entry for deferred revenue. Andy should:

debit a liability account, credit a revenue account

A classified balance sheet ____

groups asset and liabilities into current and long-term categories

On August 1, 2019, a firm prepaid $53,520 for 2 years' rent of an office building. On March 1, 2020, the firm prepaid $34,800 for 2 years' rent of a warehouse. The rent agreements on both buildings went into effect on the dates the rents were prepaid. What amount will be shown for prepaid rent on the December 31, 2020 balance sheet?

($53,520/24 months) x 7 months remaining)+(($34,800/24 months) x 14 months remaining)= 35910``

On November 1, 2019, Movers, Inc., paid $24,000 for 2 years' rent beginning on November 1. The Prepaid rent balance at December 31, 2019 equals ______.

22,000---- because Prepaid rent only has 22 months left with a balance of $22,000 (or $24,000/24 months times 22 month

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 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 would be referred to as "accruals?"

Expenses incurred, not yet paid, Goods and services provided, not yet collected

When should supplies be recorded as an expense?

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

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 6 months

occur when the cash flow occurs after either the expense is incurred or the revenue is earned

accruals

A prepayment that is originally recorded as an asset will be

allocated to future accounting periods on the cost of the asset uses during the period

Adjusting entries ensure that ______ balances are reported at amounts representing the economic benefits that remain at the end of the period

asset

Supplies that are not used immediately are recorded as a(n) ______ when purchased.

asset

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 or debit

A prepayment such as "Prepaid Insurance" is originally recorded as a ______________ when an insurance policy is purchased and will later be expensed in the period used

debit

On July 1, Book Palace prepaid 12 months' fire insurance with coverage starting the following month. The adjusting entry on December 31 includes

debit to Insurance Expense, credit to Prepaid Insurance

prepaid expenses should be ________________ by the cost of the asset used during the accounting period

decreased

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

end

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

The adjusting entry for a prepaid expense includes a debit to a(n) ______ account and a credit to a(n) ____ account.

expense, asset

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 primary purpose of adjusting entries is to record events that

have occured but have not yet been recorded

Deferred revenue is a(n) ______.

liability

The adjusting entry for a deferred revenue includes a debit to a(n) ______________ account and a credit to a(n)________________ account

liability, revenue

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

Which of the following transactions would normally be recorded as an asset when cash is paid?

rent paid in advance

Under cash-basis accounting

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