ch. 3 smartbook

$21,000 of equipment is purchased on December 1. It is estimated that it will have a life of 5 years and zero salvage value. Calculate depreciation expense as of December 31 of the first year using the straight-line method.

$21,000/60mos=$350 per month. December 1 - December 31 = 1 month.

A $300,000 building was purchased on December 1. It is estimated that it will have a life of 20 years and zero salvage value. Calculate depreciation expense for the month of December using straight-line depreciation.

$300,000/20 years = $15,000 per year. $15,000/12 months= 1250.

Its original cost (minus any salvage value) is expensed over its useful life. It has a life within the business greater than one year. It is reported on the balance sheet. It is a tangible long-term asset.

A plant asset can be defined by which of the following statements? (Check all that apply.)

Describe the general ledger after adjusting and closing entries have been posted. (Check all that apply.)

All expense accounts will show a $0 balance after closing. The abbreviations "adj." and "clos." have been entered in the explanation columns of the ledger. The Dividends account will have a $0 balance after closing. The Income Summary account will show three closing entries.

Define the Income Summary account.

An account used during the closing process A temporary account An account whose balance equals net income or net loss An account that contains a credit for the sum of all revenues

What is the book value of an asset?

Book value is the original cost of an asset minus its accumulated depreciation.

Define "current" as it applies to assets and liabilities on a classified balance sheet.

Current items are those expected to come due within one year or the company's operating cycle, whichever is longer.

Current liabilities are usually settled by paying out current assets such as cash. Current liabilities are obligations due to be paid within one year. Current liabilities are reported in the order of those to be settled first.

Current liabilities are usually settled by paying out current assets such as cash. Current liabilities are obligations due to be paid within one year. Current liabilities are reported in the order of those to be settled first.

For the current year, Bubbles Office Supply had earned $600 of interest on investments. As of December 31, none of this interest had been received or recorded. Demonstrate the required half of the adjusting entry by choosing the correct statement below.

Debit Interest receivable for $600.

At year-end, ABC Company is completing its closing process. Use the following account balances to demonstrate the closing of the Dividends account. (Check all that apply.)

Debit Retained Earnings $500. Credit Dividends for $500.

A company had the following selected balances: Account Debit Credit Service Revenue $4,000 Rental Revenue $2,000 Wages Expense $500 Utilities Expense $100 Dividends $80 Demonstrate the last closing journal entry to close the Dividends account by selecting the correct answer below.

Debit Retained Earnings $80; Credit Dividends $80

By the end of the accounting period, employees have earned salaries of $500, but they will not be paid until the following pay period. Which of the following is the proper adjusting entry?

Debit Salaries expense for $500.

An advance payment of $1,000 for services was received on December 1 and was recorded as a liability. By the end of the year, $400 had been earned. Demonstrate what the correct adjusting entry should include by choosing the correct statement below.

Debit Unearned revenues for $400.

a 24-month insurance policy was prepaid An advance payment was received from a customer earlier in the month, but only partially earned by the end of the month. Supplies were purchased at the beginning of the year, but not all were used. Six months of rent were paid in advance. Equipment was purchased in the middle of the year.

Determine which of the following transactions may require adjustments. (Check all that apply.)

A 12-month insurance policy was purchased on Dec. 1 for $3,600 and the Prepaid insurance account was increased for the payment. Demonstrate the required adjusting journal entry on Dec. 31 by selecting from the choices below.

Insurance expense would be debited for $300.

Salaries payable account? (Check all that apply.)

It is reported on the balance sheet. It reports amounts owed to employees. It is increased with a credit. It is a liability account.

Identify which of the accounts below would be classified as a plant asset account. (Check all that apply.)

Land currently being used Building Equipment Machinery

Identify the accounts below that would be classified as long-term liabilities on a classified balance sheet. (Check all that apply.)

Mortgage payable Bonds payable (due in five years)

What defines a long-term investment? (Check all that apply.)

Notes receivable and stock and bond investments are assets that are expected to be held for more than one year. Long-term investments are sometimes referred to as noncurrent investments

Which statements below are true regarding permanent and temporary accounts? (Check all that apply.)

Retained Earnings is a permanent account, but Dividends is a temporary account. Temporary accounts are reported on the income statement. Permanent accounts will appear on a post-closing trial balance. Temporary accounts have a balance for one period only. Permanent accounts are reported on the balance sheet.

An account that contains a credit for the sum of all revenues An account used during the closing process An account whose balance equals net income or net loss A temporary account

The Income Summary account can be defined as which of the following? (Check all that apply.)

An account used during the closing process A temporary account An account that contains a credit for the sum of all revenues An account whose balance equals net income or net loss

The Income Summary account can be defined as which of the following? (Check all that apply.)

What is the purpose of the Accumulated Depreciation account?

The account allows both the original cost of plant assets and the total depreciation taken to be shown simultaneously.

Unearned revenue would be debited for $700. Service revenue would be credited for $700.

They are reported on an income statement. Examples of accrued expenses are wages expense and interest expense. They refer to costs that are incurred in a period, but are both unpaid and unrecorded. Adjustments involve increasing both an expense and a liability account.

$800 of supplies were purchased at the beginning of the month and the Supplies account was increased. As of the end of the period, $200 of supplies still remain. Which of the following is the correct adjusting entry?

This would increase the Supplies account to $1,000. (800-200= $600) of supplies used.

The adjusted trial balance generally has more accounts listed than the unadjusted trial balance. The adjusted trial balance is used to prepare financial statements. The adjusted trial balance is a list of accounts and their balances after adjusting entries have been posted.

What is the difference between an adjusted trial balance and an unadjusted trial balance?

A 12-month insurance policy was purchased on Dec. 1 for $4,800 and the Prepaid insurance account was initially increased for the payment. The required adjusting journal entry on December 31 includes a: (Check all that apply.)

debit to Insurance expense for $400. credit to Prepaid insurance for $400.

Explain your understanding of the closing process by choosing the correct statements below. (Check all that apply.)

the closing process helps to summarize a period's revenues and expenses. the closing process resets the balances in temporary accounts to zero.

2 Journalize and post the adjusting entries. 2. Journalize and post the adjusting entries. 3 Prepare the adjusted trial balance. 3. Prepare the adjusted trial balance.

Answer Mode Ordering Question Your Answer incorrect Some of the steps in the accounting cycle are listed below. Place them in the correct order of use. Position 1 of 6 Journalize and post the adjusting entries. incorrect toggle button unavailable Journalize and post the adjusting entries. Position 2 of 6 Journalize and post closing entries. incorrect toggle button unavailable Journalize and post closing entries. Position 3 of 6 Journalize transactions into the journal. incorrect toggle button unavailable Journalize transactions into the journal. Position 4 of 6 Prepare post-closing trial balance. incorrect toggle button unavailable Prepare post-closing trial balance. Position 5 of 6 Prepare the financial statements. incorrect toggle button unavailable Prepare the financial statements. Position 6 of 6 Prepare the adjusted trial balance. incorrect toggle button unavailable Prepare the adjusted trial balance. Correct Answer 1 Journalize transactions into the journal. 1. Journalize transactions into the journal. 2 Journalize and post the adjusting entries. 2. Journalize and post the adjusting entries. 3 Prepare the adjusted trial balance. 3. Prepare the adjusted trial balance. 4 Prepare the financial statements. 4. Prepare the financial statements. 5 Journalize and post closing entries. 5. Journalize and post closing entries. 6 Prepare post-closing trial balance. 6. Prepare post-closing trial balance.

Which of the following lists steps of the accounting cycle in the correct order (note that not all steps are listed)?

Trial balance, Adjusting journal entries, Post-closing trial balance.

Identify the accounts below that would be classified as current liabilities on a classified balance sheet. (Check all that apply.)

Unearned rent Accounts payable Notes payable (due in three months) Taxes payable

$1,000 of cash was received in advance of performing services. By the end of the period, $300 had not yet been earned. (The Unearned revenue account was increased at the time of the initial cash receipt.) Demonstrate the required adjusting journal entry by selecting from the choices below. (Check all that apply.)

Unearned revenue would be debited for $700. Service revenue would be credited for $700.