BUS 1A Chapter 3 Financial Accounting

An adjusted trial balance is: a list of accounts and balances before adjusting entries have been recorded and posted a list of accounts and balances after adjusting entries have been recorded and posted a list of accounts and balances after adjusting entries have been recorded but before they have been posted

a list of accounts and balances after adjusting entries have been recorded and posted

$1,000 of supplies were purchased at the beginning of the month. $300 were used during the month. (The Supplies account was increased at the time of the initial purchase.) Demonstrate the required adjusting journal entry by selecting from the choices below. (Check all that apply.) Supplies expense would be credited for $300. Supplies expense would be debited for $300. Supplies would be debited for $300. Supplies would be credited for $300. Supplies expense would be debited for $700.

Supplies expense would be debited for $300. Supplies would be credited for $300.

$800 of supplies were purchased at the beginning of the month and the Supplies account was increased. As of the end of the period, $200 of supplies still remain. Which of the following is the correct adjusting entry? Supplies would be debited for $200. Supplies expense would be debited for $600. Supplies would be credited for $200. Supplies expense would be debited for $200.

Supplies expense would be debited for $600.

On December 27, a business completed a $400 service that had not yet been billed or recorded as of December 31. Demonstrate the required adjusting entry of the business by completing the following sentence. The required adjusting entry would be to debit the _______________(Unearned revenue/Accounts receivable/Cash/Service revenue) account and_____________ (debit/credit) the________________ (Unearned revenue/Accounts receivable/Cash/Service revenue) account.

Accounts receivable credit Service revenue

What are current liabilities? (Check all that apply.) Multiple select question. Current liabilities are obligations due to be paid within one year. Current liabilities are property, plant and equipment that are tangible and depreciated. Current liabilities are obligations that are not due to be settled within one year or the operating cycle, whichever is longer. Current liabilities are usually settled by paying out current assets such as cash.

Current liabilities are usually settled by paying out current assets such as cash. Current liabilities are obligations due to be paid within one year.

An advance payment of $1,000 for services was received on December 1 and was recorded as a liability. By the end of the year, $400 had been earned. Demonstrate what the correct adjusting entry should include by choosing the correct statement below. Debit Unearned revenues for $400. Credit Unearned revenues for $400. Debit Unearned revenues for $600. Debit Service revenue for $400.

Debit Unearned revenues for $400.

Chimney Sweeps provided chimney cleaning services to several clients during the month of February. Chimney's customers have not yet been billed. Chimney's customers owe $2,000 to Chimney. How will Chimney Sweeps record this transaction? Debit cash and credit services revenue Debit accounts receivable and credit cash Debit accounts receivable and credit services revenue

Debit accounts receivable and credit services revenue

Define the Salaries payable account by selecting the appropriate statement below. Multiple choice question. It reports amounts owed to employees and is reported on the income statement. It reports amounts owed to employees and is a liability. It is increased with a debit and is considered an asset account. It reports amounts owed to e

It reports amounts owed to employees and is a liability.

A plant asset can be defined by which of the following statements? (Check all that apply.) Its original cost (minus any salvage value) is expensed over its useful life. It has a life within the business greater than one year. Its original cost is expensed in the period in which it was purchased. It is reported on the balance sheet. It is a tangible long-term asset.

Its original cost (minus any salvage value) is expensed over its useful life. It has a life within the business greater than one year. It is reported on the balance sheet. It is a tangible long-term asset.

$1,000 of cash was received in advance of performing services. By the end of the period, $300 had not yet been earned. (The Unearned revenue account was increased at the time of the initial cash receipt.) Demonstrate the required adjusting journal entry by selecting from the choices below. (Check all that apply.) Service revenue would be credited for $700. Service revenue would be credited for $300. Accounts receivable would be debited for $700. Unearned revenue would be debited for $700. Unearned revenue would be debited for $300.

Service revenue would be credited for $700. Unearned revenue would be debited for $700.

Which of the following accounts is considered a prepaid expense? Multiple choice question. Accounts payable Wages expense Utility expense Supplies

Supplies

Which of the statements below is (are) correct regarding the accounting cycle? (Check all that apply.) The accounting cycle refers to the steps that occur within a company to approve expenses for payment. The accounting cycle refers to steps followed by a company to prepare its financial statements. The accounting cycle is a series of steps repeated each reporting period. The cycle contains steps for adjusting and closing accounts. The accounting cycle contains 10 steps. The accounting cycle takes place anytime the general ledger accounts need adjusting.

The accounting cycle refers to steps followed by a company to prepare its financial statements. The accounting cycle is a series of steps repeated each reporting period. The cycle contains steps for adjusting and closing accounts. The accounting cycle contains 10 steps.

What is the difference between an adjusted trial balance and an unadjusted trial balance? (Check all that apply.) The adjusted trial balance generally has more accounts listed than the unadjusted trial balance. The unadjusted trial balance is more up to date and should be used to prepare financial statements. The adjusted trial balance is used to prepare financial statements. The adjusted trial balance is a list of accounts and their balances after adjusting entries have been posted.

The adjusted trial balance generally has more accounts listed than the unadjusted trial balance. The adjusted trial balance is used to prepare financial statements. The adjusted trial balance is a list of accounts and their balances after adjusting entries have been posted.

Current assets are: cash and other resources that are expected to be sold, collected or used within one year difficult to convert to cash or other monetary assets equipment and other assets that have a life greater than one year property, plant and equipment that are tangible and depreciated

cash and other resources that are expected to be sold, collected or used within one year

A 12-month insurance policy was purchased on Dec. 1 for $4,800 and the Prepaid insurance account was initially increased for the payment. The required adjusting journal entry on December 31 includes a: (Check all that apply.) debit to Prepaid insurance for $400. credit to Insurance expense for $400. credit to Prepaid insurance for $400. debit to Insurance expense for $4,800. debit to Insurance expense for $400.

credit to Prepaid insurance for $400. debit to Insurance expense for $400.

The expense recognition (matching) principle aims to record ______________________(expenses/assets/liabilities) in the same accounting period as the ____________________(expenses/revenues/assets) that are earned as a result of those costs. This principle is a major part of the _____________________(timing/adjusting/estimating) process.

expenses revenues adjusting

Current items can be described as those expected to come due within one _________(month/year) and are listed in the order of how_____________ (quickly/slowly) they could be converted to or paid in cash.

year quickly

Illustrate your understanding of how to use the adjusted trial balance to prepare the balance sheet by completing the following sentence. In order to prepare a balance sheet using the account balances on an adjusted trial balance, all of the __________(expenses/assets) and their debit balances are transferred to the balance sheet as well as all of the __________(liabilities/revenues) and their ________ (debit/credit) balances.

assets liabilities credit

Sheldon Company had $500 for one day of accrued salaries on December 31 of the prior year. On January 4 of the current year, total salaries for the five-day week are paid. The journal entry to record the payment of salaries on January 4 includes: Debit to Salaries Payable for $500; Credit to Salaries Expense for $2,000 Credit to Salaries Payable for $500; Debit to Salaries Expense for $2,000 Debit to Salaries Payable for $500; Debit to Salaries Expense for $2,000 Credit to Salaries Payable for $500; Credit to Salaries Expense for $2,000

Debit to Salaries Payable for $500; Debit to Salaries Expense for $2,000

$800 of supplies were purchased at the beginning of the month and the Supplies account was increased. As of 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. Supplies would be debited for $200. Supplies would be credited for $200. Supplies expense would be debited for $200.

Supplies expense would be debited for $600.

Explain the difference between the unadjusted and the adjusted trial balance. The adjusted trial balance contains only the accounts which were adjusted. The unadjusted trial balance contains all of the remaining accounts. The unadjusted trial balance is more accurate and should be used to prepare financial statements. The adjusted trial balance is prepared after adjusting entries have been recorded and posted. The unadjusted trial balance is more up to date than the adjusted trial balance.

The adjusted trial balance is prepared after adjusting entries have been recorded and posted

Explain the difference between the unadjusted and the adjusted trial balance. The unadjusted trial balance is more accurate and should be used to prepare financial statements. The adjusted trial balance is prepared after adjusting entries have been recorded and posted. The unadjusted trial balance is more up to date than the adjusted trial balance. The adjusted trial balance contains only the accounts which were adjusted. The unadjusted trial balance contains all of the remaining accounts.

The adjusted trial balance is prepared after adjusting entries have been recorded and posted.

Accrual basis accounting is defined as: (Check all that apply.) Multiple select question. an accounting system that uses the matching principle to determine when to recognize revenues and expenses. an accounting system which is consistent with generally accepted accounting principles. an accounting system that uses the adjusting process to recognize revenues when earned and expenses when incurred. an accounting system that recognizes revenues when cash is received and records expenses when cash is paid.

an accounting system which is consistent with generally accepted accounting principles. an accounting system that uses the adjusting process to recognize revenues when earned and expenses when incurred. an accounting system that uses the matching principle to determine when to recognize revenues and expenses.

A company borrowed $10,000 from the bank at 5% interest. The loan has been outstanding for 45 days. Demonstrate the required adjusting entry for this company by completing the following sentence. The required adjusting entry would be to debit the Interest ________________(expense/payable/receivable) account and_________ (debit/credit) the Interest __________________(expense/payable/receivable) account.

expense credit payable

By the end of the accounting period, employees have earned salaries of $650, but they will not be paid until the following pay period. Demonstrate the required adjusting entry by completing the following sentence. The required adjusting entry would be to debit the Salaries -________________(expense/payable) account and (debit/credit) the Salaries ______________________(expense/payable/unearned) account.

expense credit payable

For the current year, a business has earned (but not recorded or received) $200 of interest from investments. Demonstrate the required adjusting entry by completing the following sentence. The required adjusting entry would be to debit the_______________ (Unearned revenue/Accounts receivable/Cash/Interest receivable) account and ____________(debit/credit) the ________________ (Cash/Accounts receivable/Interest revenue/Interest receivable) account.

interest receivable credit interest revenue

Define the Income Summary account. It is a permanent account used during the closing process to summarize revenues and expenses. It is a temporary account used during the adjusting process to summarize assets and liabilities. It is a temporary account used during the closing process to summarize revenues and expenses.

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

A classified balance sheet can be described as a balance sheet that: (Check all that apply.) contains subgroups for expenses and revenues. lists all assets according to the size of their balance with larger dollar amounts listed first. lists current assets in the order of how quickly they can be converted to cash. organizes assets and liabilities into important subgroups. is more useful to decision makers.

lists current assets in the order of how quickly they can be converted to cash. organizes assets and liabilities into important subgroups. is more useful to decision makers.

What is a plant asset? A plant asset is the portion of a current asset which will be used up in the next accounting period. A plant asset is considered temporary and will be used up within one accounting period. A plant asset refers to a long-term tangible asset used to produce and sell products or services. A plant asset refers to the stock purchased by a business held for future investment.

A plant asset refers to a long-term tangible asset used to produce and sell products or services.

The Income Summary account can be defined as which of the following? (Check all that apply.) A temporary account An account used during the closing process An account that contains a credit for the sum of all revenues An account whose balance equals net income or net loss An account that contains a credit for the sum of all expenses A permanent account

A temporary account An account used during the closing process An account that contains a credit for the sum of all revenues An account whose balance equals net income or net loss

Which of the statements below is correct regarding the difference between a temporary account and a permanent account? . A temporary account will not appear on a post-closing trial balance. Temporary account balances will be carried to the next accounting period. Permanent account balances will be transferred to the Owner, Capital account. A permanent account will not appear on a post-closing trial balance.

A temporary account will not appear on a post-closing trial balance

Identify the accounts below that would be classified as current liabilities on a classified balance sheet. (Check all that apply.)

Accounts payable Notes payable (due in three months) Unearned rent Taxes payable

Identify which of the accounts below would be classified as a current asset. (Check all that apply.) Accounts receivable Office supplies Equipment Cash Prepaid rent Land

Accounts receivable Office supplies Cash Prepaid rent

Describe an unclassified balance sheet. An unclassified balance sheet is one where assets are separated into operating assets and non-operating assets. An unclassified balance sheet is one whose items are broadly grouped into assets, liabilities, and equity. An unclassified balance sheet lists all operating expenses separate from its non-operating expenses. An unclassified balance sheet organizes assets and liabilities into important subgroups.

An unclassified balance sheet is one whose items are broadly grouped into assets, liabilities, and equity.

When does the closing process take place? At the end of an accounting period Multiple times throughout a month to determine net income Before financial statements are prepared At the beginning of an accounting period

At the end of an accounting period

Choose the statement below that explains what "closing" means. Closing means to transfer an expense account's balance to the income statement. Closing means to transfer the balance in an account to an asset account. Closing means to adjust an account's balance to its correct amount. Closing means to bring an account balance to zero.

Closing means to bring an account balance to zero.

A classified balance sheet has several categories for assets and liabilities including: (Check all that apply.) Current assets. Tangible current assets. Noncurrent (long-term) liabilities. Noncurrent equity. Operating expenses. Plant assets. Long-term investments.

Current assets. Noncurrent (long-term) liabilities. Plant assets. Long-term investments.

On December 28, I. Greasy Catering Company completed $600 of catering services. As of December 31, the customer had not been billed nor had the transaction been recorded. Demonstrate the required adjusting entry by choosing the correct statement below. Debit Catering revenue for $600. Credit Accounts receivable for $600. Debit Unearned revenue for $600. Debit Accounts receivable for $600.

Debit Accounts receivable for $600.

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. Demonstrate the required adjusting entry by choosing the correct statement below. Debit Interest payable for $30. Credit Interest expense for $30. Debit Interest expense for $30. Credit Unearned revenues for $30.

Debit Interest expense for $30.

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. Demonstrate the required half of the adjusting entry by choosing the correct statement below. Debit Interest receivable for $600. Debit Interest revenue for $600. Credit Interest receivable for $600. Debit Cash for $600.

Debit Interest receivable for $600.

By the end of the accounting period, employees have earned salaries of $500, but they will not be paid until the following pay period. Which of the following is the proper adjusting entry? Debit Salaries expense for $500. Credit Unearned revenues for $500. Credit Salaries expense for $500. Debit Salaries payable for $500.

Debit Salaries expense for $500.

Determine which of the following transactions may require adjustments. (Check all that apply.) Equipment was purchased in the middle of the year. Supplies were purchased at the beginning of the year, but not all were used. Six months of rent were paid in advance. a one-month premium on an insurance policy was paid An advance payment was received from a customer earlier in the month, but only partially earned by the end of the month. An employee was paid his weekly wages in full at the end of the week. Rent was paid for the month. a 24-month insurance policy was prepaid

Equipment was purchased in the middle of the year. Supplies were purchased at the beginning of the year, but not all were used. Six months of rent were paid in advance. An advance payment was received from a customer earlier in the month, but only partially earned by the end of the month. a 24-month insurance policy was prepaid

Which of the following statements describes the expense recognition (matching) principle? (Check all that apply.) Revenues are recorded when they are earned or services are performed. Expenses should be matched in the same accounting period as the revenues that are recognized as a result of those expenses. Matching of expenses with revenues is a major part of the adjusting process. Expenses are recorded when they are paid and revenues are recorded when payment is rece

Expenses should be matched in the same accounting period as the revenues that are recognized as a result of those expenses. Matching of expenses with revenues is a major part of the adjusting process.

A 12-month insurance policy was purchased on Dec. 1 for $3,600 and the Prepaid insurance account was increased for the payment. Demonstrate the required adjusting journal entry on Dec. 31 by selecting from the choices below. Prepaid insurance would be credited for $3,600. Insurance expense would be debited for $300. Cash would be credited for $3,600. Insurance expense would be debited for $3,600.

Insurance expense would be debited for $300

Which of the following describe the Salaries payable account? (Check all that apply.) It is increased with a debit. It is reported on the income statement. It is a liability account. It is increased with a credit. It is reported on the balance sheet. It reports amounts owed to employees.

It is a liability account. It is increased with a credit. It is reported on the balance sheet. It reports amounts owed to employees.

Select the statement below that describes a post-closing trial balance. Multiple choice question. It is a financial statement that describes all revenue and expense accounts after closing, It is a listing of all permanent accounts and their balances after closing. It is a listing of all permanent accounts and their balances immediately after the adjusting process. It is a listing of all temporary accounts and their balances after closing.

It is a listing of all permanent accounts and their balances after closing.

Select the statements below that describe the purpose of a post-closing trial balance. (Check all that apply.) One purpose is to verify that all temporary accounts have zero balances. One purpose is to verify that all permanent accounts have zero balances. One purpose is to verify that total debits equal total credits for all temporary accounts. One purpose is to confirm that if debits equal credits then no errors in journalizing and positing occurred during the period. One purpose is to verify that total debits equal total credit for permanent accounts.

One purpose is to verify that all temporary accounts have zero balances. One purpose is to verify that total debits equal total credit for permanent accounts.

Which of the following accounts would be considered a prepaid expense or prepaid asset account? (Check all that apply.)

Prepaid rent Prepaid insurance Supplies

Accrued _______________are earned in a period that are both unrecorded and not yet received in cash.

Revenue

McDarrel's records $500 of accrued salaries on December 31. Three days later, on January 3, total salaries of $4,000 (including the $500 accrued at year end) are paid. Demonstrate the required journal entry on January 3 by selecting from the choices below. (Check all that apply.) Salaries payable will be credited for $500. Wages expense will be debited for $4,000. Salaries payable will be debited for $500. Cash would be credited for $4,000. Salaries expense would be debited for $3,500.

Salaries payable will be debited for $500. Cash would be credited for $4,000. Salaries expense would be debited for $3,500.

$1,000 of supplies were purchased at the beginning of the month. $300 were used during the month. (The Supplies account was increased at the time of the initial purchase.) Demonstrate the required adjusting journal entry by selecting from the choices below. (Check all that apply.) Supplies expense would be credited for $300. Supplies would be credited for $300. Supplies expense would be debited for $300. Supplies would be debited for $300. Supplies expense would be debited for $700.

Supplies would be credited for $300. Supplies expense would be debited for $300.

Which statements below are true regarding permanent and temporary accounts? (Check all that apply.) Temporary accounts have a balance for one period only. Permanent accounts will appear on a post-closing trial balance. Retained Earnings is a permanent account, but Dividends is a temporary account. Temporary accounts are reported on the income statement. Temporary accounts will appear on a post-closing trial balance. Permanent accounts are reported on the balance sheet.

Temporary accounts have a balance for one period only. Permanent accounts will appear on a post-closing trial balance. Retained Earnings is a permanent account, but Dividends is a temporary account. Temporary accounts are reported on the income statement. Permanent accounts are reported on the balance sheet.

Which of the statements below explains the accounting cycle? Multiple choice question . The accounting cycle is another name for the adjustment process at the end of the period. The accounting cycle is repeated each reporting period and refers to the steps taken in preparing financial statements. The accounting cycle is another name for the closing process at the end of the year. The accounting cycle refers to the work sheet used during the period to record adjustments and the post-closing trial balance.

The accounting cycle is repeated each reporting period and refers to the steps taken in preparing financial statements.

Describe the final step in the adjusting process. Multiple choice question. The final step is to determine the current balance of an account. The final step is to post to a trial balance so financial statements can be prepared. The final step is to determine the correct balance of an account. The final step is to create an adjusting journal entry to get from step 1 to step 2.

The final step is to create an adjusting journal entry to get from step 1 to step 2.

Explain what unearned revenues are by selecting the statements below which are correct. (Check all that apply.) They are reported on a balance sheet. They are also called accounts receivable. They are also called deferred revenues. They refer to earnings which have been earned, but not yet billed. They are a liability. They refer to cash received in advance of performing a service or product.

They are reported on a balance sheet. They are also called deferred revenues. They are a liability. They refer to cash received in advance of performing a service or product.

Which of the following describes accrued revenue? (Check all that apply) Adjustments involve increasing both an expense account and a liability account. They refer to revenues that are earned in a period, but have not been received and are unrecorded. They refer to earnings which have been earned but not yet billed. Accounts receivable is usually increased when accruing revenues. The adjustment causes an increase in an asset account and an increase in a revenue account.

They refer to revenues that are earned in a period, but have not been received and are unrecorded. They refer to earnings which have been earned but not yet billed. Accounts receivable is usually increased when accruing revenues. The adjustment causes an increase in an asset account and an increase in a revenue account.

Identify which group of accounts may require adjustments at the end of the accounting period. Utilities expense; Cash; Common Stock Unearned revenue; Supplies; Prepaid rent Cash; Notes receivable; Land

Unearned revenue; Supplies; Prepaid rent

Explain what unearned revenues are by choosing the correct statement below. Multiple choice question. Unearned revenues refer to customer payments which have not yet been received. Unearned revenues refer to cash received in advance of providing a service or product. Unearned revenues refer to income reported on the income statement. Unearned revenues refer to amounts owed to the company that have not yet been billed.

Unearned revenues refer to cash received in advance of providing a service or product.

StoryBook Company provided services to several customers during the month of December. These services have not yet been paid by the customers. StoryBook should record the following adjusting entry at the end of December: (Select all that apply). debit services revenue credit services revenue debit cash debit accounts receivable credit accounts payable

credit services revenue debit accounts receivable

The closing process takes place at the ____________(end/beginning) of an accounting period, after the ______________ (adjusted/unadjusted) trial balance is prepared and _____________ (after/before) the financial statements are prepared.

end adjusted after

A post-closing trial balance is a list of _________(permanent/temporary) accounts and their balances from the_________ (journal/ledger) ___________(after/before) all _________(adjusting/closing) entries have been journalized and posted.

permanent ledger after closing

Accrual basis accounting recognizes (equity/revenues/expenses) when earned and records (revenues/expenses/liabilities) when (incurred/paid) in order to adhere to the matching principle.

revenues expenses incurred

Complete the following statement. The purpose of the closing process is to reset ________(temporary/permanent) account balances to zero and to transfer the changes in all of these accounts to the Retained __________(Earnings/Summary/Withdrawal) account

temporary earnings

Closing means to transfer account balances from ___________(asset/liability/permanent/temporary) accounts so that they will start with a __________(contra/larger/zero) balance at the beginning of the next period.

temporary zero

Explain your understanding of the closing process by choosing the correct statements below. (Check all that apply.) the closing process helps to summarize a period's revenues and expenses. the closing process is a helpful step in preparing financial statements. the closing process resets the balances in temporary accounts to zero. the closing process helps to determine a company's liquidity.

the closing process helps to summarize a period's revenues and expenses. the closing process resets the balances in temporary accounts to zero.