Chapter 3 deferral expenses

A plant asset can be defined by which of the following statements?

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

Which of the statements below is correct regarding the difference between a temporary account and a permanent account?

A temporary account will not appear on a post-closing trial balance

Determine which of the following transactions may require adjustments.

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

Accrued _______________are earned in a period that are both unrecorded and not yet received in cash.

Revenue

$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.)

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

Which of the following accounts is considered a prepaid expense?

Supplies

$1,000 of supplies were purchased at the beginning of the month. $300 were used during the month. (The Supplies account was increased at the time of the initial purchase.) Demonstrate the required adjusting journal entry by selecting from the choices below. (Check all that apply.)

Supplies expense would be debited for $300.

All of the following are on an unclassified balance sheet

Total assets total liabilities

Identify which group of accounts may require adjustments at the end of the accounting period.

Unearned revenue; Supplies; Prepaid rent

Explain what unearned revenues are by choosing the correct statement below.

Unearned revenues refer to customer payments which have been received in advance of providing the service or product.

Which of the accounts below are considered accrued expenses?

Wages expenses, Interest expense

Current assets are:

cash and other resources that are expected to be sold, collected or used within one year

StoryBook Company provided services to several customers during the month of December. These services have not yet been paid by the customers. StoryBook should record the following adjusting entry at the end of December: (Select all that apply).

credit services revenue debit accounts receivable

Explain your understanding of what an accrued expense is by selecting the statements below which are correct.

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

Select the statements below that describe the purpose of a post-closing trial balance. (Check all that apply.)

One purpose is to verify that all temporary accounts have zero balances.One purpose is to verify that total debits equal total credit for permanent accounts.

What is the difference between an adjusted trial balance and an unadjusted trial balance? (Check all that apply.)

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.

Illustrate your understanding of how to use the adjusted trial balance to prepare an income statement by completing the following sentence. In order to prepare an income statement using the account balances on an adjusted trial balance, all of the (revenues/liabilities) and their credit balances are transferred to the income statement as well as all of the (expenses/assets) and their (debit/credit) balances.

retained earnings, dividends

Closing means to transfer account balances from ___________(asset/liability/permanent/temporary) accounts so that they will start with a __________(contra/larger/zero) balance at the beginning of the next period.

temporary zero

Identify which of the accounts below would be classified as a current asset.

Accounts receivable Office Supplies Cash Prepaid rent

On December 27, a business completed a $400 service that had not yet been billed or recorded as of December 31. Demonstrate the required adjusting entry of the business by completing the following sentence. The required adjusting entry would be to debit the _______________(Unearned revenue/Accounts receivable/Cash/Service revenue) account and_____________ (debit/credit) the________________ (Unearned revenue/Accounts receivable/Cash/Service revenue) account.

Accounts receivablecreditService revenue

Describe an unclassified balance sheet.

An unclassified balance sheet is one whose items are broadly grouped into assets, liabilities, and equity.

The following categories are on a classified balance sheet. List them in the order that they would appear

Current Asset Long-term investment Plant asset Intangible asset Current Liabilities Long term liabilities

A classified balance sheet has several categories for assets and liabilities including: (Check all that apply.)

Current assets. Noncurrent (long-term) liabilities.Plant assets.Long-term investments.

Chimney Sweeps provided chimney cleaning services to several clients during the month of February. Chimney's customers have not yet been billed. Chimney's customers owe $2,000 to Chimney. How will Chimney Sweeps record this transaction?

Debit accounts receivable and credit services revenue

A company borrowed 4000 from the bank at an interest rate of 9%. By the end of the accounting period, the loan had been outstanding for 30 days. Demonstrate that required adjusting entry by choosing the correct statement below.

Debit interest expense for $30.

Select the statement below that describes a post-closing trial balance.

It is a listing of all permanent accounts and their balances after closing.

Which of the following accounts would be considered a prepaid expense or prepaid asset account? (Check all that apply.)

Prepaid rent Prepaid insurance Supplies

Which of the statements below explains the accounting cycle?

The accounting cycle is repeated each reporting period and refers to the steps taken in preparing financial statements.

Explain the difference between the unadjusted and the adjusted trial balance.

The adjusted trial balance is prepared after adjusting entries have been recorded and posted.

Explain what unearned revenues are by selecting the statements below which are correct. (Check all that apply.)

They are reported on a balance sheet.They are also called deferred revenues.They are a liability.They refer to cash received in advance of performing a service or product.

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.)

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

The closing process takes place at the ____________(end/beginning) of an accounting period, after the ______________ (adjusted/unadjusted) trial balance is prepared and _____________ (after/before) the financial statements are prepared.

end adjusted after

By the end of the accounting period, employees have earned salaries of $650, but they will not be paid until the following pay period. Demonstrate the required adjusting entry by completing the following sentence. The required adjusting entry would be to debit the Salaries -________________(expense/payable) account and (debit/credit) the Salaries ______________________(expense/payable/unearned) account.

expense credit payable

For the current year, a business has earned (but not recorded or received) $200 of interest from investments. Demonstrate the required adjusting entry by completing the following sentence. The required adjusting entry would be to debit the_______________ (Unearned revenue/Accounts receivable/Cash/Interest receivable) account and ____________(debit/credit) the ________________ (Cash/Accounts receivable/Interest revenue/Interest receivable) account.

interest receivablecreditinterest revenue

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.

A company borrowed $10,000 from the bank at 5% interest. The loan has been outstanding for 45 days. Demonstrate the required adjusting entry for this company by completing the following sentence. The required adjusting entry would be to debit the Interest ________________(expense/payable/receivable) account and_________ (debit/credit) the Interest __________________(expense/payable/receivable) account.

expense credit payable