Accountign exam 1

When recording an adjustment for the cost of using equipment during the current accounting period, which two accounts are affected?

Accumulated Depreciation and Depreciation Expense

When Pizza Company sells three $100 gift cards at the beginning of the month, it should record a $300 debit to______ and a $300 credit to______.

Cash; Deferred Revenue

___Expense should be recorded to recognize the cost of using long-lived assets, such as equipment, during the accounting period.

Depreciation

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

Depreciation

Which of the following situations matches a journal entry that debits Deferred Revenue and credits Service Revenue?

Goods or services, for which cash was collected in advance, were provided during the current period.

When should supplies be recorded as an expense?

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

On April 1, Katie Inc. collected $2,400 from a customer for a 12-month membership starting on that date. On December 31, Katie Inc. should credit:

Service revenue for $1,800

Which of the following statements is correct regarding a long-lived asset such as a building?

The original cost in the building account will not change when an adjusting entry is recorded for depreciation.

What are the effects on the accounting equation when an adjusting entry is made for goods or services provided during the accounting period related to an amount previously received in advance from a customer?

Total liabilities will decrease and total stockholders' equity will increase.

True or false: The adjusting entry to record depreciation does not directly reduce the long-lived asset accounts, such as Equipment, so that the original cost of the asset remains unchanged.

True

Which of the following statements is correct regarding a long-lived asset such as equipment?

When adjusting entries are recorded, the original cost in the Equipment account will not change.

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

amount of the prepayment that remains towards future rental periods

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

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

Deferred revenue appears on the______.

balance sheet as a liability

Accumulated Depreciation has a normal___balance which indicates that it reduces total assets.

credit

If an asset account such as Equipment has a normal debit balance, the associated contra account should have a normal___balance.

credit

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

credit a revenue account debit a liability account

The adjusting entry for supplies used requires a___to Supplies and a___to Supplies Expense.

credit; debit

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

debit to Deferred Revenue credit to Revenue

The adjusting entry to record the supplies used during the period will result in a(n) Blank______.

decrease to Supplies and an increase to Supplies Expense

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

decreased; increased

___revenue arises when a business receives cash in one period, but does not provide all of the related goods or services until a later period.

deferred (unearned)

The adjusting entry for equipment depreciation includes a debit to Blank______ and a credit to Blank______.

depreciation expense; accumulated depreciation

The process of allocating the cost of an asset to expense over the useful life of the asset is called___

depreciation.

True or false: A contra-asset account, such as Accumulated Depreciation, will have a normal debit balance.

false

True or false: Accumulated Depreciation is a contra-account to a long-lived asset account, such as Equipment. This means that it is added to and increases the balance of the long-lived asset in the balance sheet.

false

Munster Inc. debits Deferred Revenue and credits Service Revenue. As a result of this adjusting entry, Munster's:

liabilities will decrease equity will increase

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

liability; revenue

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

owed

The adjusting entry for supplies used during the period will result in a debit to the Blank______ account and a credit to the Blank______ account.

supplies expense; supplies

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.

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

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

asset

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

cost of rent for the accounting period

If an asset account such as Equipment has a normal debit balance, the associated contra account should have a normal___ balance

credit

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

debit to Insurance Expense credit to Prepaid Insurance

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

debit: credit

As the balance in the Accumulated Depreciation increases, total assets___because Accumulated Depreciation is a(n)___account.

decrease; credit

Deferred revenue is a(n)______.

liability

Deferred revenue is reported on the balance sheet as a current___

liability