ACC 210- Chapter 3

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

1) credit to Prepaid Insurance 2) debit to Insurance Expense

Andy records an adjusting entry for deferred revenue. Andy should

1) debit a liability account 2) credit a revenue account

When a company records an adjusting entry for services previously recorded as Deferred Revenue, it records a:

1) debit to Deferred Revenue 2) credit to Revenue

An adjusting entry for accrued expenses involves:

1) debit to an expense 2) credit to a liability

The statement of stockholders' equity includes these amounts:

1) ending balance retained earnings 2) dividends for the period 3) net income

Under cash-basis accounting

1) expenses are recorded when cash is paid 2) revenues are recorded when cash is received.

The information reported in the statement of cash flows is organized by these activities:

1) operating 2) investing 3) financing

The post-closing trial balance helps to verify that

1) we prepared and posted closing entries correctly 2) the accounts are ready for next period's transactions

Which of the following statements describes the effect that adjusting entries may have on liabilities?

Adjusting entries increase liabilities for the amount of any accrued and unpaid expenses at the end of the period.

When should supplies be recorded as an expense?

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

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.

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

accurals

A prepayment that is originally recorded as an asset will be

allocated to future accounting periods based on the cost of the asset used during the period

After the adjusting entries have been completed, the adjusted balance in the Prepaid Rent account represents the ______.

amount of the prepayment that remains towards future rental periods

At the beginning of the accounting period, the balances of temporary accounts

are zero

A prepayment such as "Prepaid Insurance" is originally recorded as a(n)

asset

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

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

asset

Prepaid rent appears in the ______.

balance sheet because it is an asset

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

closing entries

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

cost of rent for the accounting period

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

debit; credit

A prepayment is originally recorded as an asset. An adjusting entry at the end of the accounting period results in a(n) ______ in the asset account and a(n) ______ in the expense account.

decrease; increase

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

decreased; increased

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

depreciation

Permanent accounts are found in

only the balance sheet

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

paid

If an adjusting entry's debit is to an expense account, then the credit must be to

prepaid expense or liability

Accural is the opposite of

prepayment

In an adjusting entry for expenses incurred but not yet paid ______.

a liability is increasing since cash will be paid in the future due to the expense incurred

A classified balance sheet

groups asset and liabilities into current and long-term categories

defined as the "cost of borrowing money."

interest

The expense that relates to notes payable and accumulates or accrues throughout the accounting period is referred to as

interest expense

Deferred revenue is a(n) ______.

liability

The adjusting entry for a deferred revenue includes a debit to a(n) ____________ and a credit to a(n) ___________ account.

liability; revenue

At year-end, companies that utilize accrual-based accounting systems complete the measurement process through

recording of adjusting entries

Closing entries move the balances from the ______ accounts into the Retained Earnings account.

temporary

After the adjusting entries have been completed, the adjusted balance in the Deferred Revenue account represents:

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

Prepaid insurance is a(n) ______.

asset in the balance sheet