Orion 4
Huffing Corporation issued a one-year 9%, $100,000 note on April 30, 2014. Interest expense for the year ended December 31, 2014 was
$6,000 *($100,000 x 0.09 x 8/12 = $6,000)
Which necessary principle is followed in adjusting entries?
-conformity with GAAP -revenue recognition -expense recognition
An adjusting entry recording accrued salaries for a period indicates that Salaries and Wages Expense has been been paid but not yet recorded.
False
Before an adjusting entry is made to record accrued revenue, the accounts of a business reflect an overstated asset and an overstated revenue.
False
Failure to prepare an adjusting entry at the end of a period to record an accrued revenue would cause an overstatement of assets and an overstatement of revenues.
False
The adjusted trial balance is prepared after the preparation of the financial statements.
False
A law firm received $2,000 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Service Revenue. The services were completed before the end of the year however, no adjusting entry has been prepared. Which of the following is correct?
Revenues will be understated
Adjusting entries are always reflected on the balance sheet.
True
The adjusting entry for accrued salaries requires a debit to Salaries and Wages Expense.
True
The total of an adjusted trial balance is equal on both sides
True
Revenues for services performed but not yet recorded at the statement date are ______ revenues?
accrued
An adjusted trial balance includes
both temporary and permanent accounts
Juanita has performed $750 of consultancy for a client but has not billed the client as of the end of the accounting period. The adjusting entry in Juanita's books will be
debit Accounts Receivable and credit Service Revenue
Permanent accounts will have ________ balances in a post-closing trial balance.
equal
Revenue received before it is recognized and expenses used or consumed before being paid are both initially recorded as
liabilities
______ accounts will appear in a post-closing trial balance.
permanent
A post-closing trial balance will show
permanent accounts to be carried forward to the next accounting period
Post-closing trial balance is prepared after
preparing the income statement
After closing the temporary accounts, the balance in the income summary statement is transferred to
retained earnings
What is the purpose of an adjusted trial balance?
to prove the equality of all debit and credit balances after all adjustment
At the end of the fiscal year, the usual adjusting entry for accrued salaries owed to employees was omitted. This will lead to liabilities at the end of the year being
understated