College Accounting Procedures CH 3

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.

1. expense 2. credit 3. payable

A post-closing trial balance is a list of __________ (permanent/temporary) accounts and their balances ____________ (after/before) all ____________(adjusting/closing) entries have been journalized and posted.

1. permanent 2.after 3. closing

Explain your understanding of what an accrued expense is by selecting the statements below which are correct.

1.Examples of accrued expenses are wages expense and interest expense. 2.They are reported on an income statement. 3.They refer to costs that are incurred in a period, but are both unpaid and unrecorded. 4.Adjustments involve increasing both an expense and a liability account.

Which of the following statements describes the expense recognition (matching) principle? (Check all that apply.)

1.Expenses should be matched in the same accounting period as the revenues that are recognized as a result of those expenses. 2.Matching of expenses with revenues is a major part of the adjusting process.

Which statements below are true regarding permanent and temporary accounts? (Check all that apply.)

1.Permanent accounts are reported on the balance sheet. 2.Temporary accounts are reported on the income statement. 3.Temporary accounts have a balance for one period only. 4.Retained Earnings is a permanent account, but Dividends is a temporary account. 5.Permanent accounts will appear on a post-closing trial balance.

Determine which of the following transactions may require adjustments.

1.Supplies were purchased at the beginning of the year, but not all were used. 2.Six months of rent were paid in advance. 3.An advance payment was received from a customer earlier in the month, but only partially earned by the end of the month. 4.Equipment was purchased in the middle of the year. 5.a 24-month insurance policy was prepaid

Which of the statements below are correct regarding the accounting cycle? (Check all that apply.)

1.The accounting cycle is a series of steps repeated each reporting period. 2.The accounting cycle refers to steps followed by a company to prepare its financial statements. 3.The accounting cycle contains 10 steps (including an optional step). 4.The cycle contains steps for adjusting and closing accounts.

On December 1, a company pays $3,600 for a 36-month insurance policy. After one month, accrual accounting requires $_____________ (100/3,600) of insurance expense be reported on the income statement ending December 31. However, if cash basis accounting is used, $___________ (100/3,600) of insurance expense would be reported at the time of purchase.

1. $100 2. $3600

A plant asset can be defined by which of the following statements? (Check all that apply)

1. It has a life within the business more than one year. 2. Its original cost is expensed over its useful life. 3.It is reported on the balance sheet. 4.It is a tangible long-term asset.

Illustrate your understanding of how to use the adjusted trial balance to prepare a statement of retained earnings by completing the following sentence. In order to prepare the statement of retained earnings, the balance of the ___________(Retained earnings/Cash) account as well as any debit balance in the __________(Dividends/Supplies) account is transferred from the adjusted trial balance and is used along with the reported net income (loss) from the income statement.

1. Retained earnings 2. dividends

What is a plant asset?

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

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.

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 the December 31 adjusting entry by choosing the correct statement below.

Debit Unearned revenues for $400.

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.

Insurance expense would be debited for $300.

$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.

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

$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.

$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.

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

Identify which group of accounts may require adjustments at the end of the accounting period.

Unearned revenue; Supplies; Prepaid rent

Explain what unearned revenues are by choosing the correct statement below.

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

Which of the accounts below are considered accrued expenses?

Wages expense, Interest expense