ACCTG 101. Chapter 3, Smart learning
Klein Corporation's retained earnings account showed a balance of $200 at 1/1/18. During the year, the company earned revenues of $5,000 and incurred expenses of $3,000. Dividends declared were $500. The amount of retained earnings reported on the 12/31/18 balance sheet will be
$ 1,700
Wald Corporation's adjusted trial balance shows the following temporary accounts: service revenue: $20,000; salaries expense $8,000; insurance expense: $2,000; utilities expense: $3,000; interest expense $200; and depreciation expense: $1,400. As part of the the closing process, Wald should debit retained earnings for:
$ 14,600
ABC, Inc.'s income statement shows Service revenue of $40,000, Wages expense of $25,000 and Net income of $1,000. The other expenses on ABC's income statement must equal ______.
$ 14000
Wald Corporation's adjusted trial balance shows the following temporary accounts: service revenue: $20,000; salaries expense $8,000; insurance expense: $2,000; utilities expense: $3,000; interest expense $200; and depreciation expense: $1,400. As part of the the closing process, Wald should credit retained earnings for:
$ 20,000
During the year, Pizza Company, Inc. had $100,000 in revenues, $40,000 in expenses, and paid $3,000 in dividends. Net income equals ______.
$ 60,000
X Company began the month with $500 in retained earnings. During the month, X Company had revenues of $800, expenses of $600 and dividends of $50. Retained earnings at the end of the month equals $------
$ 650
Which of the following line items appear in an income statement?
- Sales Revenue - Salaries Expense
Current liabilities are ______.
due within the next year
Cash-basis accounting ______.
- records revenues when collected and expenses when paid - is generally not accepted in preparing financial statements
The two major categories reported in the income statement are:
- revenue - expense
The primary components of net income are:
- revenues - expenses
Click and drag on elements in order List these liability accounts in the order in which they would appear on a company's balance sheet.
1. Note payable (due in 5 months) 2. Notes payable (due in 5 yehars) 3. Mortgage payable (due in 25 years)
Place the steps in the adjustment process at the end of the accounting period in the correct order.
1. Using the unadjusted trial balance, determine the account 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 and credits.
Which of the following is (are) permitted under current U.S. GAAP?
Accrual-basis accounting
----- occur when the cash flow occurs after either the expense is incurred or the revenue is earned.
Accruals
When recording an adjustment for the cost of using equipment during the current accounting period, which two accounts are affected?
Accumulated Depreciation and Depreciation Expense
The income statement, statement of stockholders' equity, and balance sheet typically are prepared utilizing information shown in the
Adjusted trial balance
What are current assets?
Assets that provide benefits the next year
The retained earnings balance shown in an adjusted trial balance is the account's ----- balance.
Beginning
Click and drag on elements in order Show the order in which these asset accounts would appear on a company's balance sheet.
Cash, accounts receivable, equipment
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 ______.
Cash; Deferred Revenue
Which of the following expressions correctly calculates "total assets?"
Current assets plus long-term assets
The closing entry for expense accounts involves the following journal entry.
Debit: Retained earnings Credit: Expenses, Dividens
----- 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.
Deferred
Which of the following current liabilities does not involve the future payment of cash?
Deferred revenue
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
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 statements is true?
Income statement accounts are temporary accounts, while balance sheet accounts are permanent accounts.
Match the accounts with the correct terms. Income statement, Balance sheet report revenue minus expenses reports assets, liabilities, stockholders' equity
Income statement: report revenue minus expenses Balance sheet: reports assets, liabilities, stockholders' equity
Which of the following transactions requires an adjusting entry for accrued revenue?
Interest earned, but not yet collected, on a note receivable
In January, Pizza Company bought pizza ingredients on account for $100, with payment due to the supplier in April. The pizza ingredients were used for pizzas made in January. In which month should Pizza Company record the cost of the pizza ingredients as an expense?
January
Which of these liability accounts would appear first on a company's balance sheet?
Note payable (due in 5 months)
How do temporary accounts differ from permanent accounts?
Only temporary accounts are cleared out at the end of the accounting period.
All balance sheet accounts are ----accounts, meaning the balances are carried forward from one period to the next.
Permanent
Long-term productive assets used in the normal course of business are classified as
Property, plant, and equipment
_____ are recorded in the period that goods and services are provided to customers and _____ are recorded in the period that costs are incurred while providing those goods and services.
Revenues; expenses
Match the accounts with the correct terms. Temporary, Permanent assets, liabilities, equity revenue, expenses, dividends
Temporary : revenue, expenses, dividends Permanent: assets, liabilities, equity
Which of the following statements is true regarding the post-closing trial balance?
The post-closing trial balance is an internal report prepared as the last step in the accounting cycle.
Which of the following relationships is correct?
Total assets = total liabilities plus stockholders' equity
Which of the following statements is correct regarding a long-lived asset such as equipment?
When adjusting entries are recorded, the original cost in the Equipment account will not change.
Dividends have _____ on the stockholders' equity of a company.
a negative effect
Click and drag on elements in order Place the asset categories in the order in which they would appear on a classified balance sheet.
a. Current assets b. Long-term investments c. Property, plant and equipment d. Intangible assets
---- basis accounting helps measure and report revenues and expenses in a way that clearly represents the net income of the company.
accrual
Revenue in the income statement for the year ended December 31, 2018 equals the ______.
amount earned by selling goods or services to customers during 2018
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
After posting adjusting entries to the general ledger, a company typically prepares:
an adjusted trial balance
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
Assets, liabilities and stockholders' equity are reported on the ------- , while revenue and expense are reported on the -------.
balance sheet; income statment
The adjusted trial balance should be prepared ______ the financial statements are prepared in order to prove the ______ of the debits and credits.
before; equality
Long-lived assets, such as equipment, are reported at their ______ value in the balance sheet.
book
Long-lived assets are reported in the balance sheet at _____ value, which is equal to its original cost less _____.
book; accumulated depreciation
A closing entry may include a ______.
credit to Wages Expense
The post-closing trial balance checks that total ----- equal total ------ at the end of the period
credits; debits
Assets that will be used up or converted to cash within the next year are ---- assets.
current
The adjusting entry to record the supplies used during the period will result in a(n) ______.
decrease to Supplies and an increase to Supplies Expense
Prepaid expenses should be ______ by the cost of the asset used during the accounting period.
decreased
The closing entry for dividends involves a debit to Retained Earnings and a credit to Dividends Declared. The debit to Retained Earnings causes a(n) ---- in the balance of the account.
drop
Which of the following entries records the adjustment for revenue earned, but not yet collected?
ebit Accounts receivable and credit Sales revenue.
The _________ represents the cumulative total of net income less dividends over the life of the company.
ending balance of retained earnings
The information reported in the statement of cash flows is organized by these activities:
financing investing operating
A classified balance sheet ______.
groups asset and liabilities into current and long-term categories
During the year, a company had $100,000 in revenues, $40,000 in expenses, and paid $3,000 in dividends. The net of these items caused total stockholders' equity to ______.
increase by $57,000
Transactions that do not involve revenues or expenses and transactions that result in revenues and expenses being recorded at the same time as the cash flows
never require adjusting entries
Permanent accounts are found in:
only the balance sheet
Adjusting entries for accrued expenses ensure that liabilities are reported for all amounts ______ at the end of the accounting period.
owed
Stockholders' equity consists of two main components, common stock and ______.
retained earnings
_____ is the price earned from selling goods or services to customers.
revenue
A company may properly classify an asset that provides benefits for 15 months as a current asset if
the company's operating cycle is longer than one year
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
If revenues equal $100,000 and expenses equal $120,000, then net income (loss) must equal ______.
($20,000)
Which of the following are reported as stockholders' equity on a classified balance sheet?
- Common stock - Retained earnings
Identify the entries 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.
The ----- trial balance shows a list of all accounts and their balances after we have updated account balances for adjusting entries.
adjusted
To complete the measurement process, companies need to update balances of assets, liabilities, revenues and expenses for changes created by ------ entries.
adjusting
An adjusted trial balance shows all accounts and their balances _____ the accounts have been updated for for adjusting entries.
after
A classified balance sheet shows subtotals for current ----- and current ----
assets; liability
A classified _____ indicates whether or not a company can meet its obligations in the near future.
balance sheet
---- typically is the most liquid asset reported on the balance sheet.
cash
Adjusting entries never affect the asset account called ----
cash
Which of these asset accounts would typically appear first on a company's balance sheet?
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
In which type of liability does the company fulfill its current obligation to its customers by providing services in the future?
deferred revenue
Temporary accounts include ______, ______, and ______.
dividends expenses revenues
Revenues and expenses are reported in the:
income statement
Besides sales or service revenue, which of the following is another common example of a transaction that is recorded as an accrued revenue.
interest revenue
A long-term liability:
is not due within the next year
Retained earnings is an example of a ____ account, meaning its balance is carried forward from one period to the next. (One word per blank).
permanent
Preparing a(n) -------- trial balance is the last step in the accounting cycle and occurs after all accounts have been updated with closing journal entries. (Enter one word per blank.)
post closing
On a classified balance sheet, the sum of current and long-term liabilities refers to ----- liabilities.
total
The sum of current and long-term assets reported on the balance sheet is referred to as ------- .
total assets
Which of the following are commonly classified as current liabilities?
- Accounts payable - Salaries payable - Deferred revenue
The adjusting entry for supplies used during the period will result in a debit to the ______ account and a credit to the ______ account.
supplies expense; supplies
Creative Advertising Company had retained earnings of $100,000 at December 31, 2018. Net income for 2019 was $150,000, and dividends for 2019 were $80,000. What amount of retained earnings should be reported at December 31, 2019?
$ 170,000
Which of the following would be referred to as "accruals?"
- Goods and services provided, not yet collected - Expenses incurred, not yet paid
Accrual basis accounting differs from cash basis accounting in that accrual basis accounting records ______.
-revenues in the period when the revenue is earned, even though the cash has not yet been collected -expenses in the period incurred, even though cash has not yet been paid
The adjusting entry to record interest owed on obligations at the end of the accounting period includes a debit to "Interest ----- " and a credit to "Interest ----- ."
Expense; Payable
True or false: Since Retained Earnings is involved in the closing process, it is classified as a temporary account.
False
True or false: The adjusted trial balance presents the ending balance of retained earnings.
False
True or false: Total assets must always be equal to total liabilities less stockholders' equity
False
An advantage of a classified balance sheet is that it is easy to see ______.
If current assets are large enough to pay current liabilities
The adjusted trial balance typically is used to prepare which financial statements
Income statement; balance sheet; statement of stockholders equity
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.
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.
Which of the following transactions would normally be recorded as an asset when cash is paid?
Rent paid in advance
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
As of December 31, $400 of revenues related to goods or services provided during the period were not collected nor recorded. What adjusting entry is necessary at the end of the period?
The Accounts Receivable account should be increased by $400 and the Service Revenue account should be increased by $400.
Which of the following statements most accurately describes the purposes of the closing entries?
To establish zero balances in the income statement and dividend accounts and to transfer net income and dividends into retained earnings
What are the effects on the accounting equation when dividends are declared and paid?
Total assets decrease and total stockholders' equity decreases.
True or false: After the closing entries have been posted, the new balance in the Retained Earnings account will equal the Retained Earnings reported in the balance sheet.
True
Egon Inc. delivered goods and services during December. Payment is expected during the first week of January. An adjusting entry at the end of the period should consist of a debit to ____ and a credit to _____.
accounts receivable; service revenue
Reporting revenues only when cash is received and expenses, only when cash is paid, is called the ----- basis of accounting.
cash
Which of the following accounts will never be affected by an adjusting entry?
cash
During the closing process, the closing entries to individual expense accounts will be recorded with a ______ journal entry in order to reduce the account balance to zero.
credit
A closing entry includes a ______.
debit to Sales Revenue
In the closing process, ______ are zeroed out by crediting each account and ______ are zeroed out by debiting each account.
expenses and dividends; revenues
During the year, a company had $100,000 in revenues, $40,000 in expenses, and paid $3,000 in dividends. These items caused retained earnings to:
increase by $57,000
On December 1, Emilia Company borrowed $100,000 and signed a promissory note. The principal and interest are due on May 1 of the following year. On December 31, the company accrues interest for the month of December. The company's bookkeeper should debit interest expense and credit
interest payable
With respect to current assets, ----- refers to how quickly an asset can be converted to cash.
liquidity
Property, plant, and equipment and intangible assets are typically classified as _____ assets.
long-term
Assets that provide benefits for more than one year are classified as
long-term assets
Investments in another company's debt expected to be held for five years are reported on a classified balance sheet under this category.
long-term investments
Investments in another company's stock expected to be held for five years are reported on a classified balance sheet under this category.
long-term investments
Which of the following would typically be the first long-term asset category reported on a classified balance sheet?
long-term investments
Long-term assets are expected to provide benefits for
more than one year
Which of these is a long-term liability?
mortgage payable due in 20 years
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.
paid
The journal entry to close dividends _____ retained earnings.
reduces
Wald Corporation's adjusted trial balance shows the following temporary accounts: service revenue: $20,000; salaries expense $8,000; insurance expense: $2,000; utilities expense: $3,000; interest expense $200; and depreciation expense: $1,400. As part of the the closing process, Wald should debit
service revenue.
Closing entries move the balances from the ______ accounts into the Retained Earnings account.
temporary
In May, Sea the World Cruises, Inc. collected $1,000 cash in advance from a customer for services to be performed in June. Which of the following is true assuming accrual accounting?
$1,000 of revenue should be recorded in June.
An adjusting entry for accrued expenses involves
- debit to an expense - credit to a liability
Sabrina Company recorded an adjusting entry for salaries owed to employees at the end of the year. As a result of this entry, Sabrina Company's
- liability increase; - equity decrease
Which of the following items would be reported as intangible assets on a classified balance sheet?
- patents; - trademarks; - copyrights
Burrow, Inc. borrowed $20,000 with an annual rate of 6%, the note and interest are due at the end of two years. By the end of the first month, the interest incurred equals $----
100
Burrow, Inc. borrowed $20,000 with an annual rate of 6%, the note and interest are due at the end of two years. Calculate the interest for a three-month period.
300
Patents, copyrights, franchises, and trademarks are examples of ---- assets.
intangible
Unpaid interest should be credited to ----- payable.
interest
Deferred revenue is reported on the balance sheet as a current -----
liability
An asset that can quickly be turned into cash has the characteristic of
liquidity
If a company incorrectly records cash received for services to be provided in the future with a debit to Cash and a credit to Sales Revenue, how will this error affect net income for the current period?
net income will be too high
Zweig Company's adjusting entries include a debit to accounts receivable and a credit to service revenue. This means that Zweig:
provided services for which it did not yet receive payment
Selected items reported on Gunter Company's balance sheet are as follows: accounts payable: $10,000; notes payable: $15,000; common stock: $50,000; retained earnings: $25,000; equipment: $30,000; accumulated depreciation: (5,000). Total stockholders' equity reported on Gunter Company's balance sheet should be:
$ 75,000 Rationale: $50,000 (common stock)+$25,000 (retained earnings)
In May, Just In Thyme, Inc. billed a customer $1,000 for services performed in May. In June, Just In Thyme collected the $1,000. Which of the following is true assuming accrual accounting?
$1,000 of revenue should be recorded in May.
On December 30, Superior Strategies, Inc., collected $10,000 in advance from clients relating to consulting engagements to be performed during January of the following year. Under cash-basis accounting, revenues recorded in December will equal:
$10,000
Quartz Instruments had retained earnings of $145,000 at December 31, 2018. Net income for 2019 was $90,000, and dividends for 2019 were $30,000. What amount of retained earnings should be reported at December 31, 2019?
$205,000
Which of the following would be reported as "property, plant, and equipment" on a classified balance sheet?
- Currently used manufacturing facility - Land on which office building is located
Which of the following transactions do not require an adjusting journal entry for Mueller Corporation on December 31?
- During December, Mueller Corporation sold stock to shareholders - On December 21, Mueller Corporation declared and paid dividends.
Which of the following are results of closing entries?
- Retained earnings includes current year income less dividends - Balances in temporary accounts are zero
Which activities are part of the operating cycle?
- Selling goods and services - Paying cash to suppliers - Collecting cash from customers
Which of the following transactions do not require an adjusting journal entry for Mueller Corporation on December 31?
- Service is provided during December for cash - Shipping expense for December is paid in cash
Which of the following statements regarding the statement of cash flows are correct?
- The final financial statement that is typically prepared - Reports cash disbursements - Reports cash receipts
Norbert Company debits Accounts Receivable and credits Service Revenue. As a result of this adjusting entry, Norbert Company's:
- assets increase - equity increases
The adjusted trial balance provides account balances reported in which financial statements?
- balance sheet - income statement - statement of stockholders' equity
Which of the following would be included (added or subtracted) in the calculation of retained earnings?
- beginning balance retained earnings - revenues - expenses - dividends declared
Which of the following accounts should be classified as stockholders' equity?
- common stock - retained earnings
Which of the following account balances are shown in the adjusted trial balance and the income statement?
- depreciation expense - interest expense
The statement of stockholders' equity includes these amounts:
- dividends for the period - ending balance retained earnings - net income
On December 31, Mueller Inc., makes an adjusting entry to accrue salaries expense. As a result of this entry, Mueller's:
- equity will decrease - liabilities will increase
On a classified balance sheet, long-term assets may be reported in these sub-categories:
- intangible assets; - Property, plant, and equipment; - long term investments
The post-closing trial balance helps to verify that:
- the accounts are ready for next period's transactions - we prepared and posted closing entries correctly
Identify all transactions that do not require adjusting entries.
- transactions that do not involve revenue or expense activities - transactions that result in revenues or expenses being recorded at the same time as the cash flow
Adjusting entries:
- update the accounts to their proper balances. - are needed before financial statement preparation.
Under accrual-basis accounting, which of the following result in an expense being recorded in May? (Select all that apply.)
-The company pays cash in April for supplies in May. -The company pays cash in June for salaries earned in Ma
Under cash-basis accounting,
-revenues are recorded when cash is received. -expenses are recorded when cash is paid.
Which of the following account balances are shown in the adjusted trial balance and reported in the income statement?
-service revenue; -supplies expense
On May 1, Cut Above, Inc., collected $3,000 from customers to mow their lawns in June. Under cash-basis accounting, revenues in May will equal:
3000
Consistent with the ----- basis of accounting, we record revenue when we provide goods and services to customers, and we record expenses in the period that costs are used to provide those goods and services.
accrual
The accounting basis that records revenues in the period that goods and services are provided to customers is referred to as
accrual-basis accounting.
At the beginning of the accounting period, the balances of temporary accounts
are zero
Liabilities that will be due within the next year are ------ liabilities
current
On a classified balance sheet, total liabilities represent the sum of ---- and long-term liabilities.
current
Interest payable, salaries payable, and accounts payable are common examples of items classified as
current liabilities
During the closing process, the closing entry to reduce the sales revenue normal account balance to zero requires the revenue account be -----
debit
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
debit Utilities Expense and credit Utilities Payable
Beverly Company incurred interest on its bank loan; interest is due and will be paid at the beginning of next year. On December 31, Beverly Company should
debit interest expense and credit interest payable
Peter Inc. earned interest on its bank deposit. The interest will be received at the beginning of next year. On December 31, Peter should
debit interest receivable and credit interest revenue
During the year, Smite Company declared and paid dividends in the amount of $50,000. As part of the closing process, Smite should
debit retained earnings and credit dividends
The adjusting entry for prepaid rent requires a(n) ----- to Rent Expense and a(n) ---- to Prepaid Rent.
debit; credit
The ending balance of retained earnings represents ______.
the cumulative total of net income less dividends over the life of the company.
Temporary accounts are found in:
the income statement
Cash typically is the first current asset reported on the balance sheet because it is:
the most liquid asset
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.
Utility costs that relate to current year's operations but are not paid until the following year require: (Select all that apply.)
- A credit to Utilities Payabled. - A debit to Utilities Expense
On November 1, 2019, 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, 2019 will show:
- Prepaid rent of $22,000 - Rent expense of $2,000
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 debit Insurance Expense for $300 on Dec. 31. - Taggert will debit Prepaid Insurance for $1,800 on Dec. 1. - Taggert will credit Prepaid Insurance for $300 on Dec. 31.
The adjusting entry for an accrued revenue always includes:
- a credit to a revenue account - a debit to an asset account
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.)
- prepaid expense - liability
As of December 31, the end of the accounting period, $700 of salaries to employees have been incurred but not paid. The employees will be paid on January 5. On December 31, which two of the following will occur?
- salaries expense will increase by $700 - salaries payable will increase by $700
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 the balance of the long-lived asset in the balance sheet.
False
True or false: Salaries Receivable is the account used to record salaries owed to employees for work performed during the current period.
False
Which of the following situations matches a journal entry that debits Deferred Revenue and credits Service Revenue?
Goods or services, for which cash was collected in advance, were provided during the current period.
What are the effects on the accounting equation from an adjusting entry for revenues earned, but not yet collected, during the accounting period?
Total assets will increase 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?
Total liabilities will decrease and total stockholders' equity will increase.
What are the effects on the accounting equation from the adjusting entry for interest expense accrued, but not paid, at the end of the accounting period?
Total liabilities will increase and total stockholders' equity will decrease.
True or false: 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 unchanged.
True
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
The adjusting entry for supplies used during the period will result in ______ to the Supplies Expense account.
an increase
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
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)
asset
Prepaid insurance is a(n) ______.
asset in the balance sheet
After the adjusting entries have been completed, the balance in the Rent Expense account represents the:
cost of rent for the accounting period
If an asset account such as Equipment has a normal debit balance, the associated contra account should have a normal ----- balance.
credit
Supplies should be ______ and Supplies Expense should be ______ for the cost of supplies used up during the period.
decreased; increased
------ Expense should be recorded to recognize the the cost of using long-lived assets, such as equipment, during the accounting period.
depreciation
The process of allocating the cost of an asset to expense over the useful life of the asset is called
depreciation
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
A primary purpose of adjusting entries is to record events that
have occurred but that have not yet been recorded.
Consistent with accrual-basis accounting, expenses should be recognized
in the period when the related revenue is generated
Under the accrual basis of accounting, costs used to generate revenue are recorded as expenses
in the same period as related 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 Supplies account represents:
the cost of supplies remaining at the end of the accounting period
The difference between cash-basis and accrual-basis accounting is the ------ of when revenues and expenses are recorded.
timing
After the adjusting entries have been completed, the adjusted balance in the Interest Expense account represents:
total interest that has been paid or accrued during the period
After the adjusting entries have been completed, the balance in the "Salaries Expense" account represents:
total salaries, paid and unpaid, that have been incurred during the accounting period
Deferred revenue appears on the ______.
balance sheet as a liability
The Accounts Receivable account should be by an adjusting entry at the end of the period for any revenues that have been earned but not yet collected or recorded.
increased
Deferred revenue is a(n) ______.
liability
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
What are the effects on the accounting equation from the adjustment for salaries incurred but not yet paid during the accounting period?
Total liabilities will increase and total stockholders' equity will decrease.
After the adjusting entries have been completed, the adjusted balance in the Interest Payable account represents:
interest that has accrued, but has not been paid, at the end of the period
When a company records an adjusting entry for services previously recorded as Deferred Revenue, it records which two of the following?
debit to Deferred Revenue credit to Revenue
As the balance in the Accumulated Depreciation increases, total assets --- because Accumulated Depreciation is a(n) ---- account.
decrease; contra
Adjusting entries help to ensure that all ______ are recorded in the period in which they are incurred.
expenses
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.
asset; revenue
Munster Inc. debits Deferred Revenue and credits Service Revenue. As a result of this adjusting entry, Munster's:
- liabilities will decrease - equity will increase
Andy records an adjusting entry for deferred revenue. Andy should: (Select all that apply.)
- credit a revenue account - debit a liability account
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
An adjusting entry is necessary to record interest expense at year-end because the interest:
has already been incurred
