adjusting entries

Adjusting entries help to ensure that all ______ are recorded in the period in which they are incurred.

expenses

An asset ____ occurs when an asset is no longer useful, but cannot be sold.

retirement, retire, retires, or retirements

___ -basis accounting helps measure and report revenues and expenses in a way that clearly represents the net income of the company. (Enter only one word.)

Accrual, Accural, or Accruals

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

__ value is the amount the company expects to receive for the asset at the end of its service life. (Enter one word per blank) Listen to the complete question

Residual or Salvage

The original cost of an asset minus accumulated depreciation is

book value.

Select all that apply Which of the following are commonly used depreciation methods?

Activity-based Declining-balance Straight-line

____ is defined as the "cost of borrowing money." (Enter one word per blank)

Interest

Which statement is true about the straight-line method of depreciation?

It allocates an equal amount of depreciation to each year the asset is used.

The accumulated depreciation account is classified as a(n)

contra asset.

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

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

Prepaid insurance is a(n) ______.

asset in the balance sheet

An asset that is traded for another asset is treated as a(n) _____, whereas an asset that is sold or retired is treated as a disposition. (Enter one word per blank)

exchange

If an adjusting entry's credit is to a liability account, then the debit must be to ______.

expense

The depreciation method that is easiest to apply and results in higher net income in earlier years is

straight-line

Straight-line, declining-balance, and activity-based refer to methods commonly used to property, plant, and equipment.

depreciate or depreciation

The allocation of the cost of a tangible asset over its service life is referred to as ____. (Enter one word per blank)

depreciation

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

depreciation.

An asset that is traded for another asset is treated as a(n) , whereas an asset that is sold or retired is treated as a disposition. (Enter one word per blank)

exchange

The depreciable cost is

the cost of the asset minus the residual value.

Where is the account accumulated depreciation on equipment found on the financial statements?

As a contra account to equipment on the balance sheet

Recording depreciation results in the allocation of the cost of a long-term asset to the years during which the asset provides ____

benefits, revenues, benefit, value, or revenue

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.

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 January 1, 2018, Lennox Corporation purchased equipment for $100,000. Lennox depreciated the equipment straight--line over 10 years with no residual value. What is the book value of the equipment on January 1, 2021?

$70,000

At the beginning of year 1, Looby Corp. purchases equipment for $100,000. The equipment has a residual value of $20,000 and an expected service life of 10 years. What is straight-line depreciation for year 1?

$8,000

Select all that apply 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

Deferred revenue is a(n) ______.

liability

Adjusting entries for accrued expenses ensure that liabilities are reported for all amounts ______ at the end of the accounting period.

owed

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

When we recognize depreciation, we allocate a portion of the asset's cost to each year in which the asset

provides benefits to the company.

The adjusting entry for a deferred revenue includes a debit to a(n) ___ account and a credit to a(n) ___account. (Enter only one word per blank.)

Blank 1: liability or liabilities Blank 2: revenue

Which of the following involves both an acquisition and a disposition of an asset?

Exchange of fixed assets

At the beginning of year 1, Valerie Corp. purchases equipment for $10,000. The equipment has a residual value of $4,000 and an expected service life of 4 years. What is straight-line depreciation for year 1?

$1,500

Formula for straight line depreciation is

(cost - residual value)/service life.

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

The depreciable cost of an asset is the asset's cost minus its estimated ___ value. (Enter one word per blank)

residual or salvage

The term used to describe the amount the company expects to receive for an asset at the end of its service life is

residual value.

What depreciation method results in an equal amount of depreciation each year?

straight line

The depreciation method that allocates an equal amount of the depreciable base to each year of the asset's service life is the

straight-line method.

Straight-line deprecation is calculated as the depreciable cost divided by

the estimated service life of the asset.

The service life or useful life of an asset is

the estimated use that the company expects to obtain from the asset before disposing of it.

On January 1, 2018, Pritchett Corporation purchased equipment for $50,000. The equipment had a five-year life with a $10,000 residual value. Pritchett uses the straight-line depreciation method. What is the book value of the equipment on January 1, 2021?

26,000

Select all that apply 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 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.

____-basis accounting helps measure and report revenues and expenses in a way that clearly represents the net income of the company. (Enter only one word.)

Accrual, Accural, or Accruals

How do adjusting entries for accrued expenses affect liabilities and expenses?

Adjusting entries for accrued expenses can increase liabilities and increase expenses.

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

Asset

___ is defined as the "cost of borrowing money." (Enter one word per blank)

Blank 1: Interest

The original cost of the asset less the accumulated depreciation is the ____ ____ of the asset.

Blank 1: book Blank 2: value

The original cost of the asset less the accumulated depreciation is the ______ ______ of the asset.

Blank 1: book Blank 2: value

The allocation of the cost of a tangible fixed asset is referred to as , ____whereas the allocation of the cost of an intangible asset is referred to as _____

Blank 1: depreciation Blank 2: amortization

On January 1, year 1, Clem Corp. purchased equipment for $160,000. The equipment has a residual value of $10,000, and has a life of 100,000 hours. Clem uses the activity-based method of depreciation. In year 1, Clem used the machine 2,000 hours, and in year 2, Clem used the machine 3,000 hours. Which of the following statements is true?

Clem will depreciate the machine for $150,000 over its service life.

____ is an allocation of the cost of buildings, vehicles, and equipment to expense over time as they are used. (Enter one word per blank.)

Depreciation

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.

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 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.

_____ 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

Select all that apply 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 June for salaries earned in May. The company pays cash in April for supplies used in May.

Select all that apply The adjusting entry for an accrued revenue always includes: (Select all that apply.)

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

Reporting revenues when goods or services are provided and expenses in the period they are incurred to generate related revenues is referred to as ______-basis accounting. (Enter only one word.)

accrual, accrued, or accural

The gain or loss on disposal of an asset is calculated as:

amount received less the book value of asset sold

Select all that apply Adjusting entries: (Select all that apply.)

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

When selling a fixed asset, the seller recognizes a gain or loss for the difference between the amount received and the ______ value of the asset sold.

book

Depreciation is an allocation of the of buildings, vehicles, and equipment to expense over time as they are used. (Enter one word per blank.) Listen to the complete question

cost

Depreciation is an allocation of the______ of buildings, vehicles, and equipment to expense over time as they are used. (Enter one word per blank.)

cost

Select all that apply Andy records an adjusting entry for deferred revenue. Andy should: (Select all that apply.)

credit a revenue account debit a liability account

Select all that apply An adjusting entry for accrued expenses involves: (Select all that apply.)

debit to an expense credit to a liability

During December, Mainzel Interior Design Corporation redecorated the reception areas of a local hotel. The project was completed on December 31 with payment due in 30 days. Payment was received on January 21 of the following year. When should Mainzel recognize the related revenue using accrual accounting?

december 31st

Supplies should be ______ and Supplies Expense should be ______ for the cost of supplies used up during the period.

decreased; increased

An adjusting entry is necessary to record interest expense at year-end because the interest:

has already been incurred

A primary purpose of adjusting entries is to record events that

have occurred but that have not yet been recorded.

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.

The accounting basis that records revenues in the period that goods and services are provided to customers is referred to as

accrual-basis accounting.