Accounting Ch 3

At the end of the year, before any adjusting entries were recorded, the Office Supplies account had an unadjusted balance of $6,300. At the end of the year, an adjusting entry was journalized that included a debit to Office Supplies Expense and a credit to Office Supplies in the amount of $5,100. After that adjusting entry is posted, the adjusted balance of the Office Supplies account will be

$1,200

$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 the depreciation expense as of December 31 of the first year using the straight line method

$350

Annual reporting periods can cover

A calendar year, 52 week period, or 12 consecutive months

Work Sheet

A useful tool in working with accounting information

Fifth step in the accounting cycle

Adjust

What is the purpose of the Accumulated depreciation account

Allows both the original cost of plant assets and the total depreciation taken to be shown simultaneously

First step in the accounting cycle

Analyze transactions

When does the closing period take place?

At the end of the accounting period

Accounts Receivable is on what statement

Balance Sheet - Assets

Accumulated Depreciation is on what statement

Balance Sheet - Assets

Cash is on what statement

Balance Sheet - Assets

Equipment is on what statement

Balance Sheet - Assets

Unearned Revenue is on what statement

Balance Sheet - Liabilities

Eighth step in the accounting cycle

Close accounts

Accumulated Depreciation

Contra account the total depreciation taken on an asset since its purchase subtracted from its plant asset on the balance sheet

Third closing entry

Credit Retained Earnings Debit income summary

Close an expense account

Credit expenses Debit income summary

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. What is the required adjusting entry

Debit Interest receivable for $600

Close a dividends account

Debit Retained earnings Credit dividends

By the end of an accounting period employees have earned salaries of $500. They won't be paid until the next accounting period. What is the proper adjusting entry.

Debit Salaries expense for $500 Credit Salaries payable for $500

On December 27, a business completed a $400 service that had not yet been billed or recorded as of December 31. What is the adjusting entry

Debit accounts receivable Credit service revenue

Close a revenue account

Debit revenues and fees earned Credit income summary

A 12 month insurance policy was bought on Dec. 1 for $4,800 and the prepaid insurance was initially increased for the payment. The adjusting journal entry on Dec. 31 is?

Debit to Insurance Expanse for $400 Credit to Prepaid insurance for $400

The company's adjusted trial balance as follows includes the following accounts balances: Cash, $15,000; Equipment, $85,000; Accumulated Depreciation, $25,000; Accounts Payable, $10,000; Retained earnings, $59,000; Dividends, $2,000; Fees Earned, $56,000; Depreciation Expense, $25,000; and Salaries Expense, $23,000. All accounts have normal balances. What is the debit and credit sides for entry 2

Debit: Income Summary 48000 Credit: Depreciation Expense 25000 Salaries Expense 23000

The company's adjusted trial balance as follows includes the following accounts balances: Cash, $15,000; Equipment, $85,000; Accumulated Depreciation, $25,000; Accounts Payable, $10,000; Retained earnings, $59,000; Dividends, $2,000; Fees Earned, $56,000; Depreciation Expense, $25,000; and Salaries Expense, $23,000. All accounts have normal balances. What is the debit and credit sides for entry 3

Debit: Income Summary 8000 Credit: Retained Earnings 8000

The company's adjusted trial balance as follows includes the following accounts balances: Cash, $15,000; Equipment, $85,000; Accumulated Depreciation, $25,000; Accounts Payable, $10,000; Retained earnings, $59,000; Dividends, $2,000; Fees Earned, $56,000; Depreciation Expense, $25,000; and Salaries Expense, $23,000. All accounts have normal balances. What is the debit and credit sides for entry 4

Debit: Retained Earnings 2000 Credit: Dividends 2000

On November 1, the company rented space to another tenant. A check in the amount of $9,000, representing three months' rent in advance, was received from the tenant on that date. The payment was recorded with a credit to the Unearned Rent Revenue account. What is the debit and credit side

Debit: Unearned Rent Revenue 6000 Credit: Rent Revenue 6000

A company borrowed $4,000 from the bank at an interest rate of 9%. By the end of the accounting period, the loan had been outstanding for 30 days. What is the required adjusting entry?

Debut Interest expense for $30

Order of financial statements

Income statement, statement of retained earnings, balance sheet, statement of cash flows

Plant assets

Life within the business greater than one year Tangible long-term asset On balance sheet Original cost (minus any salvage value) is expense over its useful life

Adjusted trial balance

List of accounts and balances after adjusting entries have been recorded and posted

Adjusting journal entry

Made at the end of an accounting period to reflect a transaction or event that is not yet recorded

Adjusting entries affect

One or more balance sheet accounts and one or more income statement accounts

Third step in the accounting cycle

Post

Sixth step in the accounting cycle

Prepare adjusted trial balance

Third step for work sheet

Prepare adjusted trial balance

Seventh step in the accounting cycle

Prepare financial statements

Ninth step in the accounting cycle

Prepare post-closing trial balance

Fourth step in the accounting cycle

Prepare unadjusted trial balance

Third step in adjusting process

Record an adjusting entry

Fourth step for work sheet

Sort (adjusted) trial balance amounts to financial statements

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

Supplies expense would be debited for $600

Fifth step for work sheet

Total financial statement columns

Order of adjusting entries

Unadjusted trial balance Journalize and post Adjusted trial balance Financial statement

Income Summary

Used during the closing process to facilitate the closing of revenue and expense accounts

Accrued expenses reflect transactions when cash is paid

after the related expense is recognized

Accrued revenues reflect transactions when cash is received

after the related revenue is recognized

Interim financial statements

cover less than one year, usually spanning one-, three-, or six-month periods

Assume that the Accumulated Depreciation account has an unadjusted normal balance of $120,000. The company's list of adjusting entries includes one that debits Depreciation Expense and credits the Accumulated Depreciation account for $20,000. The adjusted balance in the Accumulated Depreciation account is a

credit balance of $140,000

Income summary account is ______ for the sum of all revenue accounts and is _______ for the sum of all expense accounts and its balance will be transferred to the _______ account

credited; debited; retained earnings

A depreciation adjustment would include a debit to the ________ account and a _________ to the ______ account

depreciation expense; credit; accumulated depreciation

What two statements are affected on a adjusting journal entry

income statement, balance sheet

Second step in the accounting cycle

journalize

Does a temporary account appear on a post-closing trial balance

no

Is Depreciation Expense included in a post-closing trial balance

no

Is Fees Earned included in a post-closing trial balance

no

Is Income Summary included in a post-closing trial balance

no

Is cash affected in a adjusting journal entry

no

In order to prepare the statement of retained earnings, the balance of (retained earnings/cash) account balance as well as any debit balance in the (supplies/dividends) account is transferred from the adjusted trial balance and is used along with the reported net income or loss from the income statement.

retained earnings; dividends;

Closing period helps

summarize a period's revenues and expenses; resets the balances in temporary accounts to zero

What type of account is dividends

temporary

What type of account will NOT appear on a post-closing trial balance

temporary

What type of accounts are reported on an income statement

temporary

Retained earnings, accounts payable, accumulated depreciation are temporary or permanent accounts?

temporary account

Income summary account

temporary account used during the closing process to summarize revenues and expenses

Closing means to transfer account balances from _______ accounts so that they will start with a _______ balance at the beginning of the next period

temporary; zero

Depreciation

the process of allocating the cost of long-term assets over their expected useful life

True or false: At least one income statement account and one balance sheet account will be involved in an adjusting journal entry

true

Is Accounts Payable included in a post-closing trial balance

yes

Aurora Corporation operated without insurance coverage for the first month of 2015. Then, on February 1, 2015, the company paid the $4,800 premium on a two-year insurance policy with benefits beginning on that date. The company uses the accrual basis. How much insurance expense will be reported on the company's income statement for the year ended December 31, 2015?

$2,200

Simmons, Inc., prepares financial statements annually as of December 31. The company uses the accrual basis. Simmons does not occupy all of the space in the building it owns; it leases the excess space to other companies. On October 1, 2015, Simmons leased a portion of its building to Harney Company at a monthly rate of $800 for eight months beginning on that date. On that same date, Harney paid the entire amount due in advance by providing a check to Simmons in the amount of $6,400 (or 8 months @ $800). During the year ended December 31, 2015, Simmons should record rent revenue relating to its lease with Harney in the amount of:

$2,400

Prepaid Insurance is on what statement

Balance Sheet - Assets

Accounts Payable is on what statement

Balance Sheet - Liabilities

On Saturday, December 31, the company's owner provided ten hours of service to a customer. The company bills $100 per hour for services provided on weekends. Payment has not yet been received. The owner did not stop in the office on Saturday; as such, on December 31, the services were unbilled and unrecorded. What is the debit and credit side?

Debit: Accounts Receivable 1000 Credit: Service Revenue 1000

On January 1, 2015, the company purchased equipment that cost $10,000. The equipment is expected to be worth about (or has a salvage value of) $1,000 at the end of its useful life in five years. The company uses straight-line depreciation. It has not recorded any adjustments relating to this equipment during 2015. What is the debit and credit side

Debit: Depreciation Expense 1800 Credit: Accumulated Depreciation 1800

The company's adjusted trial balance as follows includes the following accounts balances: Cash, $15,000; Equipment, $85,000; Accumulated Depreciation, $25,000; Accounts Payable, $10,000; Retained earnings, $59,000; Dividends, $2,000; Fees Earned, $56,000; Depreciation Expense, $25,000; and Salaries Expense, $23,000. All accounts have normal balances. What is the debit and credit sides for entry 1

Debit: Fees Earned 56000 Credit: Income Summary 56000

The company employs a single employee who works all five weekdays and is paid on the following Monday. The employee works the entire week ending on Friday, December 30. The employee earns $800 per day. What is the debit and credit side?

Debit: Salaries Expense 4000 Credit: Salaries Payable 4000

The company has a Supplies account balance of $200 on January 1, 2015. During 2015, it purchased $1,500 of supplies. As of December 31, 2015, a supplies inventory shows $500 of supplies available (that is, left on hand). What is the debit and credit side

Debit: Supplies Expense 1200 Credit: Supplies 1200

Second step in adjusting process

Determine what the correct account balance should be

First step in adjusting process

Determine what the current account balance is

Second step for work sheet

Enter adjustments

First step for a work sheet

Enter unadjusted trial balance

Consulting Revenue is on what statement

Income Statement

Depreciation Expense is on what statement

Income Statement

Insurance Expense is on what statement

Income Statement

Rent Revenue is on what statement

Income Statement

Salary Expense is on what statement

Income Statement

Tenth step in the accounting cycle

Reverse and Post (optional)

Permanent accounts appear on what statement

balance sheet

Prepaid expenses reflect transactions when cash is paid

before the related expense is recognized

Unearned revenues reflect transactions when cash is received

before the related revenue is recognized

Temporary Account is

closed at the end of an accounting period; has a balance for only one period

Is Salaries Expense included in a post-closing trial balance

no

Is dividends included in a post-closing trial balance

no

What type of account is retained earnings

permanent

Permanent accounts appear on what

post-closing trial balance

Is Accumulated Depreciation included in a post-closing trial balance

yes

Is Equipment included in a post-closing trial balance

yes

Is Retained Earnings included in a post-closing trial balance

yes

Is cash included in a post-closing trial balance

yes