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How do temporary accounts differ from permanent accounts?

Only temporary accounts are cleared out at the end of the accounting period

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?

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

Reporting revenues only when cash is received and expenses only when cash is paid is called the _____ basis of accounting

cash

The statement of stockholders' equity includes these amounts:

dividends for the period net income ending balance retained earnings

True or false: Salaries Receivable is the account used to record salaries owed to employees for work performed during the current period.

false

Adjusting entries for accrued expenses ensure that liabilities are reported for all amounts ______ at the end of the accounting period.

owed

On August 1, 2019, a firm prepaid $53,520 for 2 years' rent of an office building. On March 1, 2020, the firm prepaid $34,800 for 2 years' rent of a warehouse. The rent agreements on both buildings went into effect on the dates the rents were prepaid. What amount will be shown for prepaid rent on the December 31, 2020 balance sheet?

$52,410 Rationale: ($53,520/24 months*7 months remaining)+($34,800/24 months*14 months remaining). Note that the question is asking for the Prepaid rent on the balance sheet on December 31, 2020 and not the expense on the income statement.

On November 1, 2019, Movers, Inc., paid $24,000 for 2 years' rent beginning on November 1. The Prepaid rent balance at December 31, 2019 equals ______.

22,000

Which of the following would be referred to as "accruals?"

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

Which of the following statements is correct regarding the adjusting entry to record interest accrued on a note payable?

Interest on the note payable is classified as an expense since it is a cost of borrowing.

Which of the following statements is correct regarding a long-lived asset such as a building?

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

Your Answer incorrect What are the effects on the accounting equation from the adjustment for salaries incurred but not yet paid during the accounting period

Total liabilities will increase and total stockholders' equity will decrease.

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)

asset

norbert Inc. delivered goods and services during December. Payment is expected during the first week of January. The related adjusting entry should consist of a debit to a(n) ____ account and a credit to a(n) _____ account.

asset; revenue

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

cash-basis accounting

After the adjusting entries have been completed, the balance in the Rent Expense account represents the:

cost of rent for the accounting period

Under cash-basis accounting,

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

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

false

Munster Inc. debits Deferred Revenue and credits Service Revenue. As a result of this adjusting entry, Munster's:

liabilities would decrease equity would 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

Adjusting entries are made at the ____ of the accounting period, while daily transactions are made throughout the accounting period. (Enter one word per blank.)

end

sabrina Company recorded an adjusting entry for salaries owed to employees at the end of the year. As a result of this entry, Sabrina Company's:

equity decreases liabilities increase

If an adjusting entry's credit is to a liability account, then the debit must be to ______.

expense

The two major categories reported in the income statement are

expense revenue

After the adjusting entries have been completed, the balance in the Rent Expense account represents the:

amount of rent owed at the end of the accounting period

After the adjusting entries have been completed, the adjusted balance in the Prepaid Rent account represents the ______.

amount of the prepayment that remains towards future rental periods

Adjusting entries:

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

A prepayment such as "Prepaid Insurance" is originally recorded as a(n) ______ when an insurance policy is purchased and will later be expensed 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.

asset

If an adjusting entry's debit is to an expense account, then the credit must be to which of the following?

liability prepaid expense

An adjusting entry for accrued expenses involves:

credit to a liability debit to an expense

On July 1, Book Palace prepaid 12 months' fire insurance with coverage starting the following month. The adjusting entry on December 31 includes:

debit to Insurance Expense credit to Prepaid Insurance

The adjusting entry to record the supplies used during the period will result in a(n) ______.

decrease to Supplies and an increase to Supplies Expense

If an adjusting entry's debit is to an expense account, then the credit must be to which of the following?

prepaid expense liability

Costs of assets acquired in one period that will be recorded as expense in a future period are referred to as ______ and are initially recorded as _____.

prepaid expense asset

After the adjusting entries have been completed, the ending balance in the Supplies account represents the cost of supplies _____

remaining at the end of the accounting period

Which of the following transactions would normally be recorded as an asset when cash is paid?

rent paid in advance

How do temporary accounts differ from permanent accounts?

Only temporary accounts are cleared out at the end of the accounting period.

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 $22,000 Rent expense of $2,000

Which of the following statements is correct regarding an adjusting entry for salaries accrued but not paid at the end of the accounting period

Salaries Expense will increase by the amount of the unpaid salaries.

Which activities are part of the operating cycle?

Selling goods and services Collecting cash from customers Paying cash to suppliers

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 not change.

_____-basis accounting helps measure and report revenues and expenses in a way that clearly represents the net income of the company. (Enter only one word.)

accrual

_____occur when the cash flow occurs after either the expense is incurred or the revenue is earned

accruals

As of December 31, the end of the accounting period, $700 of salaries to employees have been incurred but not paid. The employees will be paid on January 5. On December 31, which two of the following will occur?

salaries expense will increase by $700 salaries payable will increase by $700

On April 1, Katie Inc. collected $2,400 from a customer for a 12-month membership starting on that date. On December 31, Katie Inc. should credit:

service revenue for 1,800

After the adjusting entries have been completed, the adjusted balance in the Supplies Expense account represents the cost of supplies:

used during the acct period