Ch 3 Into, Conc., Homework Practice: The accounting cycle: end of the period

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: $5,400 $20,000 $14,600

20000

The entry to close the expense accounts includes: Multiple Choice A credit to Retained Earnings. A debit to all expense accounts. A debit to Retained Earnings. A debit to all expense accounts and a credit to Retained Earnings.

A debit to Retained Earnings.

_____________-basis accounting helps measure and report revenues and expenses in a way that clearly represents the net income of the company.

Accrual

Recording salaries owed to employees that will not be paid by the company until the following accounting period is an example of a(n): Multiple Choice Prepaid expense. Unearned revenue. Accrued expense. Accrued revenue.

Accrued expense.

The adjusted trial balance should be prepared ______ the financial statements are prepared in order to prove the ______ of the debits and credits.

Before; equality

The adjusting entry to record interest earned during the period includes a: Multiple Choice Credit to Cash. Debit to Cash. Debit to Interest Expense. Credit to Interest Revenue.

Credit to Interest Revenue.

On November 1, 2021, a company receives cash of $6,000 from a customer for services to be provided evenly over the next six months. Deferred revenue is recorded at that time. Which of the following adjusting entries is needed on December 31, 2021? Multiple Choice Debit Deferred Revenue for $2,000; Credit Cash for $2,000. Debit Deferred Revenue for $2,000; Credit Service Revenue for $2,000 Debit Deferred Revenue for $6,000; Credit Service Revenue for $6,000. Debit Service Revenue for $2,000; Credit Deferred Revenue for $4,000.

Debit Deferred Revenue for $2,000; Credit Service Revenue for $2,000.

A company owes employee salaries of $5,000 on December 31 for work completed in the current year, but the company doesn't plan to pay those salaries until the following year. What adjusting entry, if any, is needed on December 31? Multiple Choice Debit Salaries Payable for $5,000; Credit Salaries Expense for $5,000. Debit Salaries Payable for $5,000; Credit Cash for $5,000. Debit Salaries Expense for $5,000; Credit Salaries Payable for $5,000.

Debit Salaries Expense for $5,000; Credit Salaries Payable for $5,000.

On December 10, a company pays $500 for advertising to appear on December 20. On which date should the expense be recorded under accrual-basis accounting? Multiple Choice December 10. December 20. One-half on each date. Neither.

December 20.

The revenue recognition principle states that companies typically record revenue: In the period in which we provide goods and services to customers. In the period in which customers order goods and services. In the period in which we received cash from customers for goods and services. In the period in which goods and services are prepared to be sold to customers.

In the period in which we provide goods and services to customers.

How do temporary accounts differ from permanent accounts? Only permanent accounts are transferred to Retained Earnings during the closing process. Only temporary accounts are used in the adjustments at the end of the accounting period. Only permanent accounts are found on the financial statements. Only temporary accounts are cleared out at the end of the accounting period.

Only temporary accounts are cleared out at the end of the accounting period.

On September 9, Clearmore Services receives a request for services from a customer. The service is scheduled for September 15. On September 15, the service is provided, and the customer pays one week later on September 22. Using accrual-basis accounting, on which date should Clearmore Services record service revenue? Multiple Choice September 9 (date of service request). September 15 (date of service). September 22 (date of cash receipt). Evenly over the three dates.

September 15 (date of service).

Which of the following describes the closing process? Multiple Choice Record external events for the period so that financial statements can be prepared. Transfer the balances of temporary accounts (revenues, expenses, and dividends) to retained earnings. Record activities that have occurred but that have not been recorded by the end of the accounting period. Store all source documents used to record transactions throughout the period.

Transfer the balances of temporary accounts (revenues, expenses, and dividends) to retained earnings.

To complete the measurement process, companies need to update balances of assets, liabilities, revenues and expenses for _________ entries.

adjusting

Adjusting entries: (Select all that apply.) are prepared at the beginning of the period. are needed before financial statement preparation. are required in cash-basis accounting only. update the accounts to their proper balances.

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

At the beginning of the accounting period, the balances of temporary accounts are zero reflect the prior period ending balance depend on whether the company was profitable during the prior period

are zero

Prepaid insurance is a(n) ______. liability in the balance sheet expense in the income statement expense in the balance sheet asset in the balance sheet

asset in the balance sheet

The entries that transfer the balances of all temporary accounts to retained earnings are referred to as external entries adjusting entries post-closing entries closing entries

closing entries

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

debits, credits

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

decreased; increased

_____________ 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

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

depreciation

Deferred revenue is a

liability

Which of the following would typically be the first long-term asset category reported on a classified balance sheet? Long-term investments Intangible assets Property, plant and equipment Current assets

long-term investments

At year-end, companies that utilize accrual-based accounting systems complete the measurement process through the preparation of an unadjusted trial balance recording of adjusting entries posting of non-cash transactions occurring during the year conversion to cash-basis

recording of adjusting entries

Financial statements are prepared from which of the following trial balances? Multiple Choice Unadjusted trial balance. Financial trial balance. Post-closing trial balance. Adjusted trial balance.

Adjusted trial balance.

When should supplies be recorded as an expense? In the period the supplies are purchased, regardless of when cash is paid In the period the supplies are used, regardless of when they were purchased In the period cash is paid for the supplies, regardless of when the supplies were received

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

Under accrual-basis accounting, companies typically report expenses: Multiple Choice In the same period in which an asset is purchased. In the same period in which cash is paid. In the same period as the revenue they help to generate. In the same period in which a liability is paid.

In the same period as the revenue they help to generate.

On March 4, Tonkawa Law asks Green Lawn Services for basic lawn maintenance totaling $200. Green Lawn provides maintenance on March 8, and Tonkawa pays for the lawn maintenance on March 12. Under accrual-basis accounting, on which date should Tonkawa record lawn maintenance expense? Multiple Choice March 4 (date of request). March 8 (date of lawn maintenance service). March 12 (date of cash payment). Evenly over the three dates.

March 8 (date of lawn maintenance service).

Which of the following describes the information reported in the income statement? Multiple Choice Net income for the period is calculated by subtracting expenses from revenues. Total assets equal total liabilities plus stockholders' equity. Changes in stockholders' equity are shown through changes in common stock and retained earnings. All accounts and account balances are shown.

Net income for the period is calculated by subtracting expenses from revenues.

On November 15, Meier Company received $3,000 cash from a customer for services that were performed on November 1. According to the Revenue Recognition Principle, on which date should the revenue be recorded? November 1. November 15. One-half on each date. Neither.

Nov. 1

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

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

accrual-basis accounting.

The adjusted trial balance provides account balances reported in which financial statements? balance sheet statement of stockholders' equity income statement financial statement notes

balance sheet statement of stockholders' equity income statement

The process of allocating the cost of an asset to expense over the useful life of the asset is called contra accounting. book value. depreciation. asset valuation.

depreciation

The statement of stockholders' equity includes these amounts: dividends for the period cash net income ending balance retained earnings

dividends for the period net income ending balance retained earnings

Adjusting entries help to ensure that all ______ are recorded in the period in which they are incurred. journal entries closing entries expenses cash transactions

expenses

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

groups asset and liabilities into current and long-term categories

Accrual basis accounting differs from cash basis accounting in that accrual basis accounting records ______. (Select all that apply.) revenues in the period when the cash was collected, even if the service was performed in a prior period 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 expenses only in the period when cash is paid revenues only in the period when cash is collected

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

Closing entries move the balances from the ______ accounts into the Retained Earnings account. temporary balance sheet permanent

temporary

Match the accounts with the correct terms. Temporary Permanent rev, exp, div assets, liabilities, equity

temporary: revenue, expenses, dividends permanent: assets, liabilities, equity

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 Supplies Expense account represents the cost of supplies: purchased, but not yet paid for, at the end of the accounting period purchased during the accounting period on hand at the end of the accounting period used during the accounting period

used during the accounting period