Accounting intro

Permanent

, assets, liabilities, equity assets, liabilities, equity

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

have occurred but that have not yet been recorded.

A primary purpose of adjusting entries is to record events that

paid

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

assets

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

False

Adjusting entries ensure that assets in the balance sheet are reported at amounts that have been used up or expired during the period.

expenses

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

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

Adjusting entries:

prepaid expenses; assets

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 _____.

Liabilty

Deferred revenue is a

cost

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

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.

35,910: because (($53,520/24 months) x 7 months remaining)+(($34,800/24 months) x 14 months remaining). Note that the question is asking for the Prepaid rent on the balance sheet on December 31, 2020 and not the expense on the income statement.

On August 1, 2019, a firm prepaid $53,520 for 2 years' rent of an office building. On March 1, 2020, the firm prepaid $34,800 for 2 years' rent of a warehouse. The rent agreements on both buildings went into effect on the dates the rents were prepaid. What amount will be shown for prepaid rent on the December 31, 2020 balance sheet?

decreased

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

decreased

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

asset in the balance sheet

Prepaid insurance is a(n)

asset

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

Taggert will credit Prepaid Insurance for $300 on Dec. 31. Taggert will debit Prepaid Insurance for $1,800 on Dec. 1. Taggert will debit Insurance Expense for $300 on Dec. 31 -.Reason: Insurance Expense is to be debited by the cost of insurance used each month which equals $300 ($1,800/6 months). -Reason: The Prepaid Insurance will be credited by $300 (not $1,500) resulting in a Sept. 30 balance of $1,500.

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?

false- Reason: Adjustments remove the value of assets that have been used up or expired during the period, leaving a balance that represents the economic benefit remaining in the account.

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.

expenses are recorded when cash is paid. revenues are recorded when cash is received.

Under cash-basis accounting

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

When should supplies be recorded as an expense?

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?

Rent paid in advance

Which of the following transactions would normally be recorded as an asset when cash is paid?

Accruals

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

temporary

revenues, expenses, dividends

cost of rent for the accounting period

After the adjusting entries have been completed, the balance in the Rent Expense account represents the:

credit to Prepaid Insurance debit to Insurance Expense

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

22,000 - Prepaid rent started with $24,000 on November 1. After 2 months of use (November 1 through December 31), Prepaid rent only has 22 months left with a balance of $22,000 (or $24,000/24 months times 22 months).

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 ______.

debit; credit

The adjusting entry for prepaid rent requires a(n------to Rent Expense and a(n) -------to Prepaid Rent.

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

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

End

Adjusting entries are made at the -----of the accounting period, while daily transactions are made throughout the accounting period

asset

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

true

Adjustments remove the value of assets that have been used up or expired during the period, leaving a balance that represents the economic benefit remaining in the account.

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.

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?

accrual-basis accounting.

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

expense; asset

The adjusting entry for a prepaid expense includes a debit to a(n) ______ account and a credit to a(n) ____ account.