acct ch 3 review

current

on a classified balance sheet, total liabilities represent the sum of ______ and long-term liabilities.

termporary, permanent

______ = revenues, expenses, dividends ______ = assets, liabilities, equity

depreciation

______ expense should be recorded to recognize the cost of using long-lived assets, such as equipment, during the accounting period.

depreciation

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

revenue

______ is the amount earned from selling goods or services to customers.

accruals

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

deferred

______ 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.

cash

______ typically is the most liquid asset reported on the balance sheet.

groups assets and liabilities into current and long-term categories

a classified balance sheet ______. a) shows only current assets and current liabilities b) groups asset and liabilities into current and long-term categories c) shows changes in assets, liabilities, revenues and expenses d) contains confidential information

assets, liabilities

a classified balance sheet shows subtotals for current ______ and current ______.

the company's operating cycle is longer tha one year

a company may properly classify an asset that provides benefits for 15 months as a current asset if a) the asset value is very large b) the company's operating cycle is shorter than one year c) the company's operating cycle is longer than one year d) the asset's useful life cannot be separated into time segments

is not due within the next year

a long-term liability a) is not due within the next year b) will be used fro many years c) is the amount that the company must repay to its stockholders

decrease; increase

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. a) increase; increase b) decrease; increase c) decrease; decrease d) increase; increase

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.

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

a prepayment that is originally recorded as an asset will be ______. a) expensed in total at the end of the accounting period b) allocated to future accounting periods based on the cost of the asset used during the period c) allocated to future accounting periods equally over the periods receiving the benefit d) transferred to a liability account at the end of the accounting period

have occurred but that have not yet been recorded

a primary purpose of adjusting entries is to record events that a) have occurred but that have not yet been recorded b) have been recorded incorrectly c) will occur at the beginning of the next period

paid

adam corporation uses the cash-basis of accounting. adam corporation should record expenses when: a) the related revenue are recognized b) paid c) incurred, regardless of when it is paid

asset

adjusting entries ensure that ______ balances are reported at amounts representing the economic benefits that remain at the end of the period. a) revenue b) account c) asset and liability d) expense e) asset

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

adjusting entries: (select all that apply) a) update the accounts to their proper balances b) are prepared at hte beginning of the period c) are required in cash-basis accounting only d) are needed before financial statement preparation

paid

after the adjusting entries have been completed, the adjusted balance in the Salaries Payable account represents wages earned by employees, but not yet ______ by the company.

the amount of sales or services still owed to the customer

after the adjusting entries have been completed, the adjusted balance in the deferred revenue account represents: a) the amount of revenues for which goods or services were provided during the current period b) the amount of sales or services still owed to the customer c) the amount of revenues for which goods or services were provided during the current period, but not collected during the period

amount of the prepayment that remains towards future rental periods

after the adjusting entries have been completed, the adjusted balance in the prepaid rent account represents the ______. a) amounts of the prepayment that has expired during the period b) amount of hte prepayment that remains towards future rental periods c) amount that is owed for rent

the cost of supplies remaining at the end of the accounting period

after the adjusting entries have been completed, the adjusted balance in the supplies account represents: a) the cost of supplies remaining at the end of the accounting period b) the cost of supplies purchased but not yet paid for at the end of the accounting period c) the cost of supplies purchased during the accounting period d) the cost of supplies used during the accounting period

total salaries, paid and unpaid, that have been incurred during the accounting period

after the adjusting entries have been completed, the balance in the "salaries expense" account represents: a) salaries that have been paid during the accounting period b) total salaries, paid and unpaid, tha thave been incurred during the accounting period c) salaries that have been incurred, but not yet paid at the end of the accounting period

cost of rent for the accounting period

after the adjusting entries have been completed, the balance in the Rent Expense account represents the: a) amount of future benefit remaining in the account b) amount of rent owed at the end of the accounting period c) cost of rent for the accounting period

remaining at the end of the accounting period

after the adjusting entries have been completed, the ending balance in the Supplies account represents the cost of supplies ______. a) used during the accounting period b) puchased during the accounting period c) remaining at the end of the accounting period d) purchased, but not yet paid for, at hte end of the accounting period

has already been incurred

an adjusting entry is necessary to record interest expense at year-end because the interest: a) it is a material business expense b) has already been incurred c) is due at the beginning of the following period d) is earned by the company

liquidity

an asset that can be quickly be turned into cash has the characteristic of a) currency b) superior c) operational d) liquidity

debit a liability account, credit a revenue account

andy records an adjusting entry for deferred revenue. andy should: (select all that apply) a) debit revenue account b) debit a liability account c) credit a revenue account d) credit a liability account

decrease, contra

as the balance in the accumulated depreciation increases, total assets ______ because accumulated depreciation is a(n) ______ account.

long-term

assets that provide benefits for more than one year are classified as a) cuurent b) short-term c) long-term d) intangible

current

assets that will be used up or converted to cash within the next year are ______ assets.

are zero

at the beginning of the accounting period, the balances of temporary accounts a) reflect the prior period ending balance b) are zero c) depend on whether the company was profitable during the prior period

debit utilities expense and credit utilities payable

at the end of december, berber company receives a utility bill for $920 associated with its december operations. berber will pay the bill on january 5. on december 31, berber should a) debit utilities expense and credit cash b) debit prepaid expense and credit utilities payable c) debit utilities payable and and credit utilities expense d) do not make any journal entry since the bill will not be paid until january e) debit utilities expense and credit utilities payable

recording of adjusting entries

at year-end, compnaies that utilize accrual-based accounting systems complete the measurement process through a) conversion to cash-basis b) the preparation of an unadjusted trial balance c) recording of adjusting entries d) posting of non-cash transactions occuring during the year

the most liquid asset

cash typically is the first current asset reported on the balance sheet because it is: a) the first account in the general ledger b) the most liquid asset c)the easiest one to measure

temporary

closing entries move the balances from the ______ accounts into the retained earnings account. a) balance sheet b) temporary c) permanent

in the period when the related revenue is generated

consistent with accrual-basis accounting, expenses should be recognized a) when a binding agreement is signed b) when cash is paid by the customer c) in the period when the related revenue is generated

balance sheet as a liability

deferred revenue appears on the ______. a) balance sheeet as an asset b) balance sheet as a liability c) income statement d) statement of retained eawrnings

liability

deferred revenue is reported on the balance sheet as a current ______.

adjusting entries for accrued expenses can increase liabilities and increase expenses

how do adjusting entries for accrued expenses affect liabilities and expenses? a) adjusting entries for accrued expenses can increase liabilities and increase expenses b) adjusting entries for accrued expenses can decrease liabilities and increase expenses c) adjusting entries for accrued expenses can increase liabilities and decrease expenses d) adjusting entries for accrued expenses can decrease liabilities and decrease expenses

expense

if an adjusting entry's credit is to a liability account, then the debit must be to ______. a) expense b) cash expense c) revenue d) prepaid expense

liability, prepaid expense

if an adjusting entry's debit is to an expense account, then the credit must be to which of the following? (select all that apply) a) cash expense b) liability c) prepaid expense d) revenue

credit

if an asset account such as equipment has a normal debit balance, the associated contra account should have a normal ______ balance

a liability is increasing since cash will be paid in the future due to the expense incurred

in an adjusting entry for expenses incurred but not yet paid ______. a) a liability is increasing since cash will be paid in the future due to the expense incurred b) the liability recorded when cash was received is increaasing as the expense is incurred c) a liability is decreasing since cash is being paid for an expense incurred at the time of the adjustment d) the liability recorded when cash was received is decreasing as the expense is incurred

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

more than one year

long-term assets are expected ot provide benefits for a) one yeawr b) less than one year c) more than one yeare

equity will increase, liabilities will decrease

munster inc. debits deferred revenue and credits service revenue. as a result of this adjusting entry, munster's: (select all that apply) a) liabilities will increase b) assets will decrease c) equity will decrease d) equity will increase e) liabilities will decrease f) assets will increase

asset

neumann corporation purchases supplies that will be used during the following quarter. at the time of purchase, the supplies should be recorded as a(n) a) liability b) revenue c) expense d) asset

asset; revenue

norbert inc. delivered goods and services during december. payment is expected during the first week of january. the related adjusting entry should consist of a debit to a(n)______ account and a credit to a(n) ______ account. a) revenue; asset b) liability; revenue c) liability; asset d) asset; revenue

intangible assets; long-term investmentws; property, plant, and equipment

on a classifed balannce sheet, long-term assets may be reported in these sub-categories: (select all that apply) a) trade receivables b) intangible assets c) long-term investments d) inventories e) property, plant, and equipment

total

on a classified balance sheet, the sum of current and long-term liabilities refers to ______ liabilities.

debit to insurance expense; credit to prepaid insurance

on july 1, book palace prepaid 12 months' fire insurance with coverage starting the following month. the adjusting entry on december 31 includes: (select all that apply) a) debit to insurance expense b) credit to prepaid insurance c) debit to cash d) credit to cash e) debit to prepaid insurance

prepaid rent of $22,000; rent expense of $2,000

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: (select all that apply) a) prepaid rent of $24,000 b) prepaid rent of $22,000 c) rent expense of $1,000 d) rent expense of $24,000 e) rent expense of $2,000

$22,000

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 ______. a) $22,000 b) $23,000 c) $12,000 d) $0

decreased

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

long-term

property, plant, and equipment and intangible assets are typically classified as ______ assets. a) other b) permanent c) long-term d) current

cash

reporting revenues only when cash is received and expenses only when cash is paid is called the ______ basis of accounting

amount earned by selling goods or sesrvices to customers during 2021

revenue in the income statement for the year ended december 31, 2021 equals the: a) accounts receivable balance in the december 31, 2021 balance sheet b) amount earned by selling goods or serevices to customers during 2021 c) amount of cash collected from customers during 2021

income statement

revenues and expenses are reported in the: a) income statement b) stockholders' equity statement c) balance sheet d) statement of cash flows

liabilities increase, equity decreases

sabrina company recorded an adjusting entry for salaries owed to employees at the end of hte year. as a result of this entry, sabrina company's: (select all that apply) a) liabilities increase b) liabilities decrease c) assets decrease d) equity decreases e) assets increase f) equity increases

retained earnings

stockholders' equity consists of two main components, common stock and ______. a) expenses b) retained earnings c) dividends d) revenues

decreased; increased

supplies should be ______ and supplies expense should be ______ for the cost of supplies used up during the period. a) increased; decreased b) increased; increased c) decreased; decreased d) decreased; increased

asset

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

taggert will debit prepaid insurance for $1,800 on dec. 1; taggert will debit insurance expnse for $300 on dec. 31; taggert will credit prepaid insurance for $300 on dec. 31

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? (selet all that apply) a) taggert will debit prepaid insurance for $1,800 on dec. 1 b) taggert will debit prepaid insurance for $1,500 on dec. 31 c) taggert will debit insurance expense for $1,800 on dec. 1 d) taggert will debit insurance expnse for $300 on dec. 31 e) taggert will credit prepaid insurance for $300 on dec. 31

liability, revenue

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

expense; asset

the adjusting entry for a prepaid expense includes a debit to a(n) ______ account and a credit to a(n) ______ account. a) liability; revenue b) revenue; liability c) expense; asset d) asset; expense

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

the adjusting entry for an accrued revenue always includes (select all that apply) a) a debit to a liability account b) a debit to an asset account c) a credit to an asset account d) a credit to a liability account e) a debit to a revenue account f) a credit to a revenue account

depreciation expense; accumulated depreciation

the adjusting entry for equipment depreciation includes a debit to ______ and a credit to ______. a) accumulated depreciation; depreciation expense b) depreciation expense; accumulated depreciation c) equipment; accumulated depreciation d) equipment; depreciation expense

debit;credit

the adjusting entry for prepaid rent requires a(n) ______ to rent expense and a(n) ______ to prepaid rent.

an increase

the adjusting entry for supplies used during the period will result in ______ to the supplies expense account. a) an increase b) no change c) a decrease

supplies expense; supplies

the adjusting entry for supplies used during the period will result in a debit to the ______ account and a credit to the _____ account. a) supplies expense; cash b) cash; supplies expense c) supplies; supplies expense d) supplies expense; supplies

decrease to supplies and an increase to supplies expense

the adjusting entry to record the supplies used during the period will result in a(n) ______. a) increase to supplies and a decrease to supplies expense b) decrease to supplies and a decrease to supplies expnse c) decrease to supplies and an increase to supplies expense d) increase to supplies and an increase to supplies expense

closing entries

the entries that transfer the balances of all temporary accounts to retained earnings are referred to as a) closing entries b) adjusting entries c) external entries d) post-closing entries

operating, financing, investing

the information reported in the statement of cash flows is organized by these activities: (select all that apply) a) operating b) business c) financing d) investing e) accounting

debit, credit

the post-closing trial balance checks that total ______ equal total ______ at the end of the period.

depreciation

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

net income, ending balance retained earnings, dividends for the period

the statement of stockholders' equity includes these amounts: (select all that apply) a) total revenues for the period b) net income c) cash d) ending balance retained earnings e) dividends for the period

total assets

the sum of current and long-term assets reported on the balance sheet is referred to as ______ ______.

expense, revenue

the two major categories reported in the income statement are: a) expense b) equity c) revenue d) assets

when costs are recognized as expenses in the income statement

there is a cause-and-effect relationship between revenues and expenses that dictates: a) the ordering of assets and liabilities in the balance sheet b) where in the income statement expenses should be presented c) when revenues are recognized in the income statement d) when costs are recognized as expenses in the income statement

adjusting

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

false

true or false: a contra-asset account, such as accumulated depreciation, will have a normal debit balance.

false

true or false: accumulated depreciation is a contra-account to a long-lived asset account, such as equipment. this means that it is added to and increases the balance of the long-lived asset in the balance sheet.

false

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

true or false: salaries receivable is the account used to record salaries owed to employees for work performed during the current period.

false

true or false: total assets must always be equal to total liabilities less stockholders' equity

a debit to utilities expense, a credit to utilities payable

utility costs that relate to current year's operations but are not paid until the folllowing year require: (select all that apply) a) a credit to cash b) a debit to utilities expense c) a credit to utilities payable d) a debit to prepaid expense - utilities e) no journal entry

assets that provide benefits within the next

what are current assets? a) assets that provide benefits within the next year b) assets that will be used for many years c) assets that must be paid for within 12 months d) any assets that were purchased for cash

total liabilities will increase and total stockholders' equity will decrease

what are the effects on the accounting equation from the adjustment for salaries incurred but not yet paid during the accounting period? a) total liabilities will increase and total stockholders' equity will decrease b) total liabilities will decrease and total stockholders' equity will decrease c) total liabilities will increase and total stockholders' equity will increase d) total liabilities will decrease and total stockholders' equity will increase

total liabilties will decrease and total stockholders' equity will increase

what are the effects on the accounting equation when an adjusting entry is made for goods or services provided during the accounting period related to an amount previously received in advance from a customer? a) total liabilities will increase and total stockholders' equity will increase b) total liabilities will decrease and total stockholders' equity will decrease c) total liabilities will increase and total stockholders' equity will decrease d) total liabilities will decrease and total stockholders' equity will increase

cash; deferred revenue

when pizza company sells three $100 gift cards at the beginning of the month, it should record a $300 debit to ______ and a $300 credit to ______. a) cash; deferred revenue b) deferred revenue; cash c) account receivable; revenue d) cash; service revenue

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

when should supplies be recorded as an expense? a) in the period the supplies are used, regardless of when they were purchased b) in the period cash is paid for the supplies, regardless of when the supplies were received c) in the period the supplies are purchased, regardless of when cash is paid

selling goods and services

which activities are part of the operating cycle? a) buying property, plant and equipment b) issuing new shares c) selling goods and services

paying cash to suppliers, selling goods and services, collecting cash from customers

which activities are part of the operating cycle? (select all that apply) a) paying cash to suppliers b) selling goods and services c) buying property, plant, and equipment d) issuing new shares e) colllecting cash from customers

statement of stockholders' equity

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? a) comprehensive income statement b) balance sheet c) statement of stockholders' equity d) retained earnings statement e) income statement

reports cash receipts, reports cash disbursements, the final financial statement that is typically prepared

which of hte following statements regarding the statement of cash flows are correct? (select all that apply) a) the financial statemetn that is typically prepapred first b) reports cash receipts c) reports ash disbursements d) the final financial statement that is typically prepared e) it is an optional financial statement

common stock, retained earnings

which of the following accounts should be classified as stockholders' equity? a) common stock b) retained earnings c) net income d) deferred revenue

current assets plus long-term assets

which of the following expressions correctly calculates "total assets?" a) cash plus accounts receivable plus equipment b) cash plus supplies plus accounts receivable plus prepaid expenses c) current assets plus long-term assets d) current assets plus long-term assets minus current liabilities

on november 1, the company pays rent for the next six months

which of the following pre-payments requires an adjusting entry at the end of the year? a) on december 31, the company pays next year's fire insurace b) on november 1, the company pays rent for the next six months c) on december 20, the company pays its liability insurance; coverage starts january 1

total assets = total liabilities plus stockholders' equity

which of the following relationships is correct a) total assets = total liabilities less stockholders' equity b) total assets plus total liabilities = stockholders' equity c) total assets = total liabilities plus stockholders' equity d) total liabilities minus stockholders' equity = total assets

goods or services, for which cash was collected in advance, were provided during the current period

which of the following situations matches a journal entry that debits deferred revenue and credits service revenue? a) goods or services, for which cash was collected in advance, were provided during the current period b) cash was collected for goods or services to be provided next period c) cash was collected for goods or services provided during the current period

the original cost in the building account will not change when an adjusting entry is recorded for depreciation

which of the following statements is correct regarding a long-lived asset such as a building? a) the original cost in the building account will decrease when an adjusting entry is recorded for depreciation b) the orginal cost in teh building account could increase or decrease when an adjusting entry is recorded for depreciation c) the original cost int eh building account will not change when an adjusting entry is recorded for depreciation d) the original cost in the building account will increase when an adjusting entry is recorded for depreciation

when adjusting entries are recorded, the original cosst in the equipment account will not change

which of the following statements is correct regarding a long-lived asset such as equipment? a) when adjusting entries are recorded, the original cost in the equipment account will decrease b) when adjusting entries are recorded, the original cost int he eequipment account could increase or decrease c) when adjusting entries are recorded, the original cost in the equipment account will not change d) when adjusting entries are recorded, the original cost in the equipment account will increase

salaries expense will increase by the amount of unpaid salaries

which of the following statements is correct regarding an adjusting entry for salaries accrued but not paid at the end of the accounting period? a) salaries payable will decrease by the amount of the unpaid salaries b) salaries expense will be recorded as a credit for the amount of hte unpaid salaries c) salaries expense will increase by the amount of the unpaid salaries d) salaries payable will be recorded as a debit for the amount of hte unpaid salaries

interest ont he note payable is classified as an expense since it is a coset of borrowing

which of the following statements is correct regarding the adjusting entry to record interest accrued on a note payable? a) 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 b) interest on the note payable is classified as an expense since it is a cost of borrowing c) interest on the note payable is classified as a revenue since it is an amount that can be earned on investments d) interest on the note payable will not accumulate because it is paid at the end of each year

income statement accounts are temporary accounts, while balance sheet accounts are permanent accounts

which of the following statements is true? a) the income statement reports the financial position of a company at a point in time b) the balance sheet reports financial activities only for the current accounting period c) income statemetn accounts are temporary accounts, while balance sheet accounts are permanent accounts

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 transactions are examples of prepayments that will require an adjustment at the end of the accounting period on december 31? (select all that apply) a) a company records interest expense that has accrued, but will not be paid until next year b) a company pays for 4 months of advertising in the wall street journal on november 1 c) a company pays a utility bill for charges incurred in the previous month d) a company pays a 6-month insurance premium at the beginning of october

rent paid in advance

which of the following transactions would normally be recorded as an asset when cash is paid? a) current month utilities b) current month salaries c) advance payments from customers d) rent paid in advance

expenses incurred, not yet paid; goods and services provided, not yet collected

which of the following would be referred to as "accruals?" (select all that apply) a) cash paid prior to expenses being incurred b) cash collected prior to goods or services being provided c) expenses incurred, not yet paid d) goods and services provided, not yet collected

mortgage payable due in 20 years

which of these is a long-term liability? a) accounts payable b) note payable due in 5 months c) mortgage payable due in 20 years d) contributed capital

liquidity

with respect to current assets, ______ refers to how quickly an asset can be converted to cash.