acc211 chapter 3 ls

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

During 2018, mariam company accrued $500,000 for employee salaries. On december 31, 2018, the company accrued another $30,000 for salaries that will be paid on January 5, 2019. The amount of expense reported on the income statement for the year ended december 31, 2018 should be:

$580,000

Sterling Company paid $1,200 for 3 months of rent on April 1 of the current year. On april 30, Sterling company made an adjusting entry to account for the rent that expired during the month of april. The adjusting entry contained a debit to rent expense. In the amount of $_ and a credit to Prepaid Rent in the amount of $_. The remaining balances In the Prepaid rent account after the adjustment was $_.

400,400,800

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 equal $_.

650

Under which of the following circumstances would cash-basis accounting always report lower revenue than accrual-basis accounting?

Accounts receivable increases and deferred revenue remarks unchanged from the prior period.

How do accrual adjustments affect liabilities and expenses?

Accrual adjustments can increase liabilities and increase expenses.

Which of the following is (are) permitted under current U.S. GAAP?

Accrual-basis accounting

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

Credit to prepaid insurance debit to insurance expense

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

False

which of the following adjustments would be referred to as "accruals"?

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

Why is an adjustment necessary for Interest Incurred on a note payable at the end of this period if the interest will not paid until the note payable is due?

In order to accurately portray the liabilities of the company all amounts owed should be reported in the balance sheet. Even though the interest will not be paid until a future period, the expense was actually incurred during the current accounting period.

___ is defined as the "cost of borrowing money."

Interest

Which of the following transactions constitutes an accrual adjustment involving a revenue account?

Interest earned, but not yet collected, on a note receivable.

After the adjustments have been completed, the adjusted balance in the interest payable account represents:

Interest that has accured, but has not been paid, at the end of the period.

if an adjusting entry debit is to an expense account, then the credit must be to one of the following:

Liability prepaid expense

The _ principle requires that a portion of long-lived asset cost be transferred to an expense account during the accounting period when the asset is being used to generate revenues.

Matching

Morris Lest, Inc. received and paid a $500 electric bill in June for services in May. IN which month should Morris Lest record the expense?

May

ABC Company paid $6,000 cash for insurance in June that provides coverage for 6 months, from July through December. How much expense should be recognized in June to be in accordance with generally accepted accounting principles?

No expense should be recognized in June

On November 1,2018, 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 31,2018 will show:

Rent expense of $2,000 Prepaid rent of $22,000

__ is the price earned from selling goods or services to customers.

Revenue

Which of the following statements is correct regarding the adjustment for salaries accrued but not paid at the end of the accounting period?

Salaries expense will increase. A credit is used to record an increase in a liability account.

The adjustment for supplies used during the period will result in a debit to the _ account and a credit to the _ account.

Supplies expense; Supplies

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.

What are the effects on the accounting equation from the adjustment for depreciation?

Total assets will decrease and total stockholders' equity will decrease.

what are the effects on the financial condition of the business from the adjustment 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 from the adjustment for interest expense accrued, but not paid, at the end of the accounting period?

Total liabilities will increase and total stockholders' equity will decrease.

egon 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 _ and a credit to _.

accounts receivable; service revenue

consistent with the ___-basis of accounting, we record revenue when we provide goods and services to customers, and we record expenses with the related___.

accrual, revenues

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

adjusting

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

allocated to future accounting periods based on the value of the benefit used during the period.

after the adjustments 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 adjusting trial balance

In recording an accrual adjustment to account for revenues earned but not yet collected _.

an asset is increased since cash will be collected at a later date.

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

which of the following would be included(added or subtracted_ in the calculation of retained earnings?

beginning balance retained earnings revenues expenses dividends declared

Long-lived assets, such as equipment, are reported at their _ value in the balance sheet.

book

Accrual adjustments are needed when a company has earned revenue or incurred an expense but _ has not been exchanged.

cash

Adjusting entries never affect account called _.

cash

which of these asset accounts would typically appear first on a company's balance sheet?

cash

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

The entries that transfer the balances of all temporary accounts to retained earnings are referred to as

closing entries

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

credit a revenue account, debit a liability account.

When a company provides services previously recorded as deferred revenue, it records a:

credit to revenue debit to deferred revenue

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

credits; debits

Expenses decrease net income and retained earnings, so expenses are recorded with a _, just like all decreases in stockholders' equity.

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.

The closing entry for expense accounts involves the following journal entry.

debit-retained earnings credit - expenses

_ expense should be recorded to recognize the use of and benefit received from long-lived assets, such as equipment, during the accounting period.

depreciation

Sabrina Company accrues salaries expense at the end of the year. As a result of this entry, Sabrina Company's:

equity decrease, liabilities increase

Munster Inc. debits deferred revenue and credits service revenue. as a result of this adjusting entry, Munster's:

equity will increase liabilities will decrease

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

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.

expense

The adjusting entry to record salaries owed to employees at the end of the accounting period includes a debit to "Salaries_" and a credit to "salaries_".

expense, payable

Adjustments help to ensure that all _ are recorded in the period in which they are incurred?

expenses

The primary components of net income are:

expenses, revenues

Adjusting entries are posted to _ _ accounts to update their balances

general, ledger

Adjusting entries are posted to ___ ____ accounts to update their balances.

general, ledger

Consistent with the revenue recognition principle, revenue should be recognized when

goods or services are provided to customers

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.

The adjustment for supplies used during the period will result in a(n)_ to the supplies expense account.

increase

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

On december 1, emilia company borrowed $100,000 and signed a promissory note. The principal and interest are de 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

besides sales or service revenue, which of the following is another common example of transaction that is recorded as an accrued revenue.

interest revenue

On december 41, mueller inc. makes an adjusting entry to accrue salaries expense. As a result of this entry, Mueller's:

liabilities will increase, equity will decrease.

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

an asset that can quickly be turned into cash has the characteristic of

liquidity

preparing a(n) _,_ trial balance is the last step in the accounting cycle.

post- closing

Closing entries may affect the following permanent account(s):

retained earnings

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 payable will increase by $700 salaries expense will increase by $700

which activities are part of the operating cycle?

selling goods and services

closing entries move the balance from the _ accounts into the retained earnings account.

temporary

after the adjustments have been completed, the adjusted balance in the deferred revenue account represents:

the amount of the sales or services still owed to the customer.

After the adjustments have been completed, the balance in the "salaries expense" account represents:

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

after the adjustments have been completed, the balance in the "salaries expense" account represents:

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

The matching principle dictates:

when cost are recognized as expenses in the income statement

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

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:

$3,000

Burrow, Inc. borrowed $20,000 with an annual rate of 6%, the not and interest are due at the end of two years. Calculate the interest for a three-month period.

$300

Which of the following adjustments would be referred to as "accruals"?

Goods and services provided, but not yet collected. Expenses Incurred, not yet paid.

At the end of October, Pizza Company sold pumpkin spice pizzas for Halloween parties on account. The customer have 30 days to pay for the pizzas. In which month should pizza Company record the revenue under accrual accounting?

October

If a company determines that it has $1,400 of supplies on hand at the end of the period, which of the following statements is correct?

The company has $1,400 in supplies remaining at the end of the period.

Under accrual-basis accounting, which of the following result in an expense being recorded in May?

The company pays cash in April for supplies in May. The company pays cash in June for salaries earned in May.

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

cost

which of the following entries record the adjustment for revenue earned, but not yet collected?

debit accounts receivable and credit sales revenue.

Property, plant, and equipment and intangible assets are typically classified as _ assets.

long term

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

Adam Corporation uses the cash-basis of accounting. Adam Corporation should record expenses when:

paid

zweig company's adjusting entries include a debit to accounts receivable and credit to service revenue. This means that zweig:

provided services for which it did not yet receive payment

The _ represents the cumulative total of net income less dividends over the life of the company.

retained earnings

which of the following transactions would not require an adjusting journal entry for mueller corporation on december 31?

shipping expense for december is paid in cash service is provided during december for cash.

Match the accounts with the correct terms.

temporary - revenues, expenses, dividends permanent - assets, liabilities, equity

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.

which of the following trial balances shows account balances that incorporate current year deferrals and accruals?

Adjusted trial balance. post-closing trial balance

During December, Mainzel Interior Design Corporation redecorated the reception areas of a local hotel. The project was complete 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?

December 31

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

Taggert Company paid $1,800 for a 6-month insurance premium on September 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 Sept. 30. Taggert will credit Prepaid Insurance for $300 on Sept. 30. Taggert will debit Prepaid Insurance for $1,800 on Sept.1.

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

The accounts receivable should be _ when adjusting at the end of the period for any revenue that have been earned but not yet collected or recorded.

debited

cash typically is the firs current asset reported on the balance sheet because it is:

the most liquid asset

Which of the following statements is correct regarding a long-lived asset such as building?

the original cost in the building account will not change during the adjustment process.

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

total