ACC 210 module 3

Deferred revenue is a(n) ---

liability

On November 1, 2022, Movers, Inc., paid $24,000 for 2 years' rent beginning on November 1. The Prepaid rent balance at December 31, 2022 equals

22,000

Which of the following transactions are examples of prepayments that will require an adjustment at the end of the accounting period on December 31?

A company pays a 6-month insurance premium at the beginning of October. A company pays for 4 months of advertising in the Wall Street Journal on November 1.

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

Depreciation

When should supplies be recorded as an expense?

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

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

accruals

In recording an accrual adjusting entry to account for revenues earned but not yet collected,

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

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

Under the accrual basis of accounting, costs used to generate revenue are recorded as expenses:

in the same period as related revenue.

The adjusting entry for a deferred revenue includes a debit to a(n) --- account 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

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.

Adjusting entries:

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

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

increase; decrease

How do adjusting entries for accrued expenses affect liabilities and expenses?

Adjusting entries for accrued expenses can increase liabilities and increase expenses.

Which of the following pre-payments requires an adjusting entry at the end of the year?

On November 1, the company pays rent for the next six months.

How do temporary accounts differ from permanent accounts?

Only temporary accounts are cleared out at the end of the accounting period.

On November 1, 2022, 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, 2022 will show:

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

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

Rent paid in advance

Which of the following statements regarding the statement of cash flows are correct?

Reports cash receipts The final financial statement that is typically prepared Reports cash disbursements

Which of the following financial statements typically is prepared last?

Statement of cash flows

The adjusting entry for an accrued revenue always includes

a debit to asset account a credit to a revenue account

To complete the measurement process, companies need to update balances of assets, liabilities, revenues and expenses for changes created by -- entries

adjusting

Revenue in the income statement for the year ended December 31, 2021 equals the:

amount earned by selling goods or services to customers during 2021.

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

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

asset

Reporting revenues only when cash is received and expenses only when cash is paid is called --the basis of accounting.

cash

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

closing entries

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

cost

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

credit to Prepaid Insurance debit to Insurance Expense

When a company records an adjusting entry for services previously recorded as Deferred Revenue, it records which two of the following?

credit to Revenue debit to Deferred Revenue

An adjusting entry for accrued expenses involves:

credit to a liability debit to an expense

The adjusting entry for prepaid rent requires a(n) --- to rent expense and a(n) --- to prepaid rent

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

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

expense; asset

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.

false

A classified balance sheet Blank______.

groups asset and liabilities into current and long-term categories

An adjusting entry is necessary to record interest expense at year-end because the interest:

has already been incurred

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

intrest

The expense that relates to a formal note payable and accumulates or accrues throughout the accounting period is referred to as -- expense

intrest

Adjusting entries for accrued expenses ensure that liabilities are reported for all amounts ______ at the end of the accounting period.

owed

-- is the amount earned from selling goods or services to customers.

revenue

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

temporary

There is a cause-and-effect relationship between revenues and expenses that dictates

when costs are recognized as expenses in the income statement.

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

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

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

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?

Taggert will credit Prepaid Insurance for $300 on Dec. 31. Taggert will debit Insurance Expense for $300 on Dec. 31. Taggert will debit Prepaid Insurance for $1,800 on Dec. 1.

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) --- when an insurance policy is purchased and will later be expensed in the period used.

asset

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

asset

Prepaid insurance is a(n)

asset in the balance sheet

A classified balance sheet shows subtotals for current -- and current --

asset, liabilities

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

cost of rent for the accounting period

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

debit a liability account credit a revenue account

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

decreased

The statement of stockholders' equity includes these amounts:

dividends for the period net income ending balance retained earnings

Consistent with accrual-basis accounting, expenses should be recognized

in the period when the related revenue is generated

Revenues and expenses are reported in the:

income statement

The two major categories reported in the income statement are:

revenue expense

Under cash-basis accounting

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

After the adjusting entries have been completed, the adjusted balance in the Supplies Expense account represents the cost of supplies:

used during the accounting period

Which of the following statements is correct regarding the adjusting entry to record interest accrued on a note payable?

Interest on the note payable is classified as an expense since it is a cost of borrowing.

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

expenses