Econ 6A-Chapter 3

$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 by selecting from the choices below.

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

Determine which of the following transactions may require adjustment:

-Supplies were purchased at the beginning of the year, but not all were used. -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 -Equipment was purchased in the middle of the year. -Six months of rent were paid in advance.

Place the steps in the adjusting process in the correct order in which they would be performed:

1. Determine what the current account balance is 2. Determine what the correct account balance should be 3. Record and adjusting entry

Show your understanding of the steps involved in adjusting entries by placing the following steps in the correct order of preparation

1. Prepare and unadjusted trial balance 2. Journalize and post adjusting entries 3. Prepare an adjusted trial balance 4. Prepare financial statements

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 ___ and their debit balances are transferred to the balance sheet as well as all of the ___ and their ___ balances.

Assets, Liabilities, Credit

Which of the following lists of assets would be classified as plant assets?

Buildings, Equipment

Illustrate your understanding of how to use the adjusted trial balance to prepare a statement of owner's equity by completing the following sentence: In order to prepare the statement of owner's equity, the Owner ___ account balance as well as any debit balance in the withdrawals ___ account is transferred from the adjusted trial balance and is used along with the reported net income (loss) from the income statement.

Capital; Withdrawals

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 expense for $30 (you would also credit interest payable account)

A depreciation adjustment would include a debit to ___ and ___ to ___.

Depreciation Expense; Credit; Accumulated Depreciation

The expense recognition (matching) principle aims to record ___ in the same accounting period as the ___ that are earned as a result of those costs. This principle is a major part of the ___ process.

Expenses; Revenues; Adjusting

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 adjusted journal entry on Dec. 31 by selecting from the choices below.

Insurance expenses would be debited for $300.

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 ___ account and ___ the ___ account

Interest Receivable; Credit; Interest Revenue

Illustrate your understanding of how to use the adjusted trial balance to prepare an income statement by completing the following sentence: In order to prepare an income statement using the account balances on an adjusted trial balance, all of the ____ and their credit balances are transferred to the income statement as well as all of the ___ and their ___ balances.

Revenues, expenses, debit

Accrual basis accounting recognizes ___ when earned and records ___ when ___in order to adhere to the matching principle.

Revenues; Expenses; Incurred

What is the purpose of the Accumulated Depreciation account?

The account allows both the original cost of plant assets and the total depreciation taken to be shown simultaneously.

Explain the difference between the adjusted and the unadjusted trial balance

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