ACCT201 - SB3

___-basis accounting helps measure and report revenues and expenses in a way that clearly represents the net income of the company.

Accrual

Which of the following pre-payments required an adjusting entry at the end of the year? - On December 20, the company pays its liability insurance; coverage starts January 1 - On December 31, the company pays next year's fire insurance - On November 1, the company pays rent for the next six months

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

Which of the following transactions would normally be recorded as an asset when cash is paid? - Current month salaries - Advance payments from customers - Current month utilities - Rent paid in advance

Rent paid in advance

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

True

The accounting basis that records revenues in the period that goods and services are provided to customers is referred to as - accrual-basis accounting - GAAP-basis accounting - cash-basis accounting

accrual-basis accounting

The accounting basis that records revenues in the periods that goods and services are provided to customers is referred to as: - GAAP-basis accounting - cash-basis accounting - accrual-basis accounting

accrual-basis accounting

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) - expense - revenue - liability - asset

asset

Supplies that are not used immediately are recorded as a(n) ___ when purchased. - asset - expense - revenue - liability

asset

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

cost

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

debit credit

The adjusting entry to record the supplies used during the period will result in a(n) ___ - increase to Supplies and increase to Supplies Expense - decrease to Supplies and a decrease to Supplies Expense - decrease to Supplies and an increase to Supplies Expense - increase to Supplies and a decrease to Supplies Expense

decrease to Supplies and an increase to Supplies expense

Initially a prepayment for items such as rent or insurance are recorded as assets and later are recorded as a9N) ___ in the period the benefit expires.

expense

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

expense; asset

___ occur when the cash flow occures after either the expense is incurred or the revenue is earned.

Accruals

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

decreased; increased

The process of allocating the cost of an asset to expense over the useful life of the asset is called - contra accounting - asset valuation - book value - depreciation

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 - Cash was collected for goods or services provided during the current period - Cash was collected for goods or services to be provided next period

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

Adjusting entries ensure that ___ balances are reported at amounts representing the economic benefits that remain at the end of the period - revenue - asset and liability - asset - expense - account

asset

Prepaid insurance is a(n) ___ - expense in the balance sheet - liability in the balance sheet - asset in the balance sheet - expense in the income statement

asset in the balance sheet

After the adjusting entries have been completed, the balance sheet in the Rent Expense account represents the: - amount of rent owed at the end of the accounting period - cost of rent for the accounting period - amount of the future benefit remaining in the account

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

Which of the following would be referred to as "accruals?" (Select all that apply) - Cash collected prior to goods or services being provided - Cash paid prior to expenses being incurred - Expenses incurred, not yet paid - Goods and services provided, not yet collected

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

The adjusting entry for supplies during the period will result in ___ to the Supplies Expense account. - a decrease - an increase - no change

an increase

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 - the amount of revenues for which goods or services were provided during the current period, but not collected during the period - the amount of revenues for which goods or services were provided during the current period

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 - purchased, but not yet paid for, at the the end of the accounting period - on hand at the end of the accounting period - purchased during the accounting period

used during the accounting period

Which of the following transactions are examples of prepayments that will require an adjustment at the end of the accounting period on December 31? (Select all that apply) - A company pays for 4 months of advertising in the Wall Street Journal on November 1 - A company pays a 6-month insurance premium at the beginning of October - A company pays a utility bill for charges incurred in the previous month

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

Prepaid rent appears in the ___ - balance sheet because it is an asset - income statement because it is an expense - balance sheet because it is a liability - income statement because it is an asset - balance sheet because it is a stockholders' equity account

- balance sheet because it is an asset

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 - Equipment and Depreciation Expense - Service Revenue and Equipment - Accumulated Depreciation and Equipment

Accumulated Depreciation and Depreciation Expense

___ 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

Accumulated Depreciation has a normal ___ balance which indicates that it ___ total assets.

debit, depreciates

As the balance in the Accumulated Depreciation increases, total assets ___ because Accumulated Depreciation is a(n) ___ account.

decrease, contra

The adjusting entry for a prepaid expense includes a debit to a(n) ___ account and a credit to a(n) ___ account - revenue; liability - expense; asset - liability; revenue - asset; expense

expense; asset

Adam Corporation uses the cash-basis of accounting. Adam Corporation should record expenses when: - paid - incurred, regardless of when it is paid - the related revenue are recognized

paid

Which of the following transactions are examples of prepayments that will require an adjustment at the end of the accounting period on December 31? (Select all that apply) - A company records interest expense that has accrued, but will not be paid until next year - A company pays for 4 months of advertising in the Wall Street Journal on November 1 - A company pays a utility bill for chages incurred in the previous month - A company pays for a 6-monthh insurance premium at the beginning of October

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

Which of the following would be referred to as "accurals?" (Select all that apply) - Cash paid prior to expenses being incurred - Goods and services provided, not yet collected - Cash collected prior to goods or services being provided - Expenses incurred, not yet paid

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

On November 1, 2019, 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, 2019 will show: (Select all that apply) - Prepaid rent of $24,000 - Rent expense of $1,000 - Rent expense of $24,000 - Rent Expense of $2,000 - Prepaid rent of $22,000

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

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? (Select all that apply) - Taggert will credit Prepaid Insurance for $300 on Dec. 31 - Taggert will debit Prepaid Insurance for $1,800 on Dec. 1 - Taggert will debit Insurance Expense for $300 on Dec. 31 - Taggert will debit Prepaid Insurance for $1,500 on Dec. 31 - Taggert will debit Insurance Expense for $1,800 on Dec. 1

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

___ 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

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

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 the balance of the long-lived asset in the balance sheet.

False

True or false: Adjusting entires ensure that assets in the balance sheet are reported at amounts that have been used up or expired during the period.

False

True or false: Adjusting entries ensure that assets in the balance sheet are reported amounts that have been used up or expired during the period.

False

Which of the following statements is correct regarding a long-lived asset such as a building? - The original cost in the building account could increase or decrease whn an adjusting entry is recorded for depreciation - The original cost in the building account will increase when an adjusting entry is recorded for depreciation - The original cost in the building account will not change when an adjusting entry is recorded for depreciation - The original cost in the building will decrease whn an adjusting entry is recorded for depreciation

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

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 increase - When adjusting entries are recorded, the original cost in the Equipment account will not change - When adjusting entries are recorded, the original cost in the Equipment account could increase or decrease - When adjusting entries are recorded, the original cost in the Equipment account will decrease

When adjusting entries are recorded, the orignal cost in the Equipment account could increase or decrease

A prepayment such as "Prepaid Insurance" is originally recorded as a(n) ___ when an insurance policy is purchased and will later be expenses in the period used.

asset

Adjusting entries ensure that ___ balances are reported at amounts representing the economic benefits that remain at the end of the period. - account - asset and liability - expense - revenue - asset

asset

Adjusting entries ensure that ___ balances are reported at amounts representing the economic benefits that remain at the end of the period. - asset - account - asset and liability - revenue - expense

asset

Prepaid expenses should be ___ by the cost of the asset used during the accounting period - increased - decreased - unaffected

decreased

The adjusting entry for equipment depreciation includes a debit to ___ and a credit to ___ - accumulated depreciation; depreciation expense - equipment, accumulated depreciation - equipment; depreciation expense - depreciation expense; accumulated depreciation

deprecation expense; accumulated depreciation

The adjusting entry for supplies used during the period will result in a debit to the ___ account and a credit to the ___ account. - supplies expense; supplies - supplies; supplies expense - supplies expense, cash - cash; supplies expense

supplies expense; supplies

When a company records an adjusting entry for services previously recorded as Deferred Revenue, it records a: - debit to Deferred Revenue - debit to Cash - credit to Deferred Revenue - credit to Revenue - credit to Accounts Receivable - credit to Cash

- debit to Deferred Revenue - credit to Revenue

After the adjusting entries have been completed, the adjusted balance in the Prepaid Rent account represents the ___ - amount o the prepayment that has expired during the period - amount that is owed for rent - amount of the prepayment that remains towards future rental periods

- amount of the prepayment that remains towards future rental periods

On July 1, Book Palace prepaid 12 months' fire insurance with coverage starting the following month. The adjusting entry on December 31 includes: (Select all that apply) - credit to Cash - debit to Prepaid Insurance - debit to Insurance Expense - debit to Cash - credit to Prepaid Insurance

- debit to Insurance Expense - credit to Prepaid Insurance

Under cash-basis accouning, (Select all that apply) - revenues are recorded when goods or services are provided - expenses are recorded in the period related revenue is generated - expenses are recorded when cash is paid - revenues are recorded when cash is received

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

Munster Inc. debits Deferred Revenue and credits Service Revenue. As a result of this adjusting entry, Munster's: (Select all that apply) - assets will increase - equity will decrease - liabilities will increase - assets will decrease - liabilities will decrease - equity will decrease

- liabilities will decrease - equity will increase

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

cash

After the adjusting entries have been completed, the adjusted balance in the Supplies account represents: - the cost of supplies remaining at the end of the period - the cost of supplies purchased but not yet paid for at the end of the accounting period - the cost of supplies purchased during the accounting period - the cost of supplies used during the accounting period

- the cost of supplies remaining at the end of the accounting period

Adjusting entries: - are prepared at the beginning of the period - are required in cash-basis accounting only - update the accounts to their proper balances - are needed before financial statement preparation

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

When recording an adjustment for the cost of using equipment during the current accounting period, which two accounts are affected? - Equipment and Depreciation Expense - Service Revenue and Equipment - Accumulated Depreciation and Equipment - Accumulated Depreciation and Depreciation Expense

Accumulated Depreciation and Depreciation Expense

Adjusting entries are made at the ___ of the accounting period, while daily transactions are made throughout the accounting period.

end

After the adjusting entries have been completed, the ending balance in the Supplies account repersents the cost of supplies ___ - purchased during the accounting period - purchased, but not yet paid for, at the end of the accounting period - used during the accounting period - remaining at the end of the accounting period

remaining at the end of the accounting period