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    Homework   1.1  1.2   2.1  2.2  3.1  3.2   4.1  4.2  5.1  5.2   6.1   6.2  7.1  7.2  8.1  8.2  9.1  9.2  10.1   10.2  11.1   11.2  12.1  12.2   13.1  13.2

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.
 

   
Describe the final step in the adjusting process.
 
The final step is to create an adjusting journal entry.
   
Explain your understanding of what unearned revenues are by selecting the statements below which are correct. (Check all that apply.)
 

   
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.
 

   
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.)
 

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

   
Show your understanding of the steps involved in adjusting entries by answering the following:
 
An adjusting journal entry is made at the end (beginning/middle/end) of an accounting period.
   
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 balance of the Owner Capital (Capital, Cash) account balance as well as any
debit balance in the withdrawals (Withdrawals, Supplies) account is transferred from the adjusted trial balance and is used along with
the reported net income (loss) from the Income statement.
   
$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.
   
The matching principle aims to record expenses (expenses/assets/liabilities) in the same accounting period
as the revenues (expenses/revenues/assets) that are earned as a result of those costs.
This principle is a major part of the adjusting / timing/adjusting/estimating) process.
   
Which of the following statements about t he Accumulated depreciation accou nt is (are) correct?
(Check all that apply.)
 

   
A $300, 000 building was purchased on Dec 1. It is estimated that it will have a life of 20 years.
Calculate depreciation expense for the month of December using straight-line depreciation.
 
$1,250
   
What is depreciation?
 
Depreciation is the process of allocating the costs of long-term assets over their expected useful life.
   
Review the following statements and determine which is (are) correct regarding an adjusted trial balance and how it is
used in preparing financial statements. (Check all that apply.)
 

   
Explain your understanding of a contra account by filling in the following blanks.
 

   
$200 of supplies were purchased at the beginning of the period and recorded as an asset. During the period, $90 of supplies were used.
The adjustment to show the supplies used up would cause assets (assets/ liabilities/ expenses) to be reduced and expenses
(expenses/ liabilities / revenues) to be increased, so net income would decline.
   
Illustrate your understanding of how to use the adjusted trial balance to prepare the balance sheet by completing the following sentence.
 

   
What is the book value of an asset?
 
Book value is the original cost of an asset less its accumulated depreciation.
   
Which of the following refers to the preparation of an adjusted trial balance? (Check all that apply.)
 

   
Cash basis accounting is defined as:
 
an accounting system which recognizes revenues when cash is received and records expenses when cash is paid.
   
Which of the following lists of assets would be classified as plant assets?
 
Buildings, Equipment
   
Explain the difference between the unadjusted and the adjusted trial balance.
 
The adjusted trial balance is prepared after adjusting entries have been recorded and posted.
   
The formula to figure out the profit margin of a company is Net income (Net income / Accounts
Receivable / Net sales) divided by net sales (Net income/ Cash / Net sales).
   
On December 1, 2015, a company pays $3,600 for a 36-month insurance policy.
After one month, accrual accounting requires $100 (100/3,600) of insurance expense be reported on the income statement
ending December 31, 2015. However, if cash basis accounting is used, $3,600 (100/3,600) of insurance expense would be
reported at the time of purchase.
   
A business has a $10,000 loan from a bank at 8% annual interest.
Calculate the amount of interest to accrue if the loan has been outstanding for 45 days. Use a 360-day year.
 
$100
 
10,000 x 0.08 x 45 / 360 = 100
   
Define the Salaries payable account by selecting the appropriate statement below.
 
It reports amounts owed to employees and is a liability.
   
The Fish Aquarium obtained funds from a bank and owes interest on a note at the end of the month.
 
The required adjusting journal entry will debit interest expense and credit interest payable.
   
A calendar-year-end reporting period is defined as a I2 / (1 / 3 / 12) -month period which ends on
December (December/January/March) 31st.
   
Given the following m ormat1on or Mouse Inc., calculate its profit margin for the year 2014
 

 
14.29%
 
500 / 3,500 = .142857
   
Describe the difference that exists between U.S. GAAP and IFRS in adjusting accounts by completing the following sentence.
 
Both (Both/Neither) U.S. GAAP and (and/nor) IFRS provide guidance for adjusting accounts at period
end which includes deferrals and accruals.
   
The revenue recognition principle states that revenue:
 
should be recorded when it is earned.
   
Mouse Inc. uses the alternative method of accounting for prepayments and purchased a $1,200, 6-month insurance policy.
The company immediately debited the Insurance expense account. By the end of the period, $400 of the policy had expired.
Demonstrate the required adjustment needed at the end of the period.
 
Debit Prepaid insurance $800.
   
Which of the following statements accurately explains how to use a worksheet to enter adjustments? (Check all that apply.)
 

   
What defines a fiscal year for a business?
 
It is any period which consists of 12 consecutive months.
   
Rather than debiting an asset account, which of the following statements explains an alternate recording procedure
to journalize prepaid expenses, such as prepaid rent or supplies. (Check all that apply.)
 
Record all prepaid expenses with debits to expense account.
Any unused prepaids existing at end of period are transferred to asset accounts.
   
Mouse Inc. received a $2,500 prepayment of rent from one of its tenants and immediately credited the Rent revenue account.
By the end of the period, $500 of the rent had not been earned by Mouse Inc..
Demonstrate the required adjustment needed at the end of the period.
 
Debit Rent revenue for $500.
   
Which of the following statements best explains the posting process of adjusting entries?
 
Posting is done as soon as possible after the adjustments are journalized.
   
A prepaid expense (such as supplies or prepaid rent) can initially be recorded as either an expense or as an asset.
Demonstrate your understanding of adjusting for prepaid expenses by selecting the statement that is correct.
 
No matter how a prepaid expense was initially recorded, after adjustment, the financial statements will be identical.
   
Which of the following statements correctly define(s) a profit margin? (Check all that apply.)
 
Profit margin is the ratio of a business's net income to its net sales
Profit margin is also called return on sales
Profit margin is a useful measure of a business's operating results.
   
What is the date primarily used in adjusting entries?
 
The last day of the period
   
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.)
 

   
Identify the statement(s) below which is (are) correct regarding the use of estimates in accounting. (Check all that apply.)
 
When following the matching principle, sometimes estimates are used because the actual expense or revenue amount is not yet known.
Matching expenses with revenues often requires us to predict certain events which we are not always able to do.
   
Which of the accounts below are considered accrued expenses?
 
Wages expense, Interest expense
   
Which of the following adjustments would be required at the end of the period? (Check all that apply.)
 

   
Determine which statement(s) below correctly describe(s) the similarities that exist between U.S. GAAP and IFRS in
preparing financial statements. (Check all that apply.)
 

   
Which statements below are true regarding permanent and temporary accounts? (Check all the apply.)
 
Permanent accounts are reported on the balance sheet.
Temporary accounts are reported on the income statement.
Retained Earnings is a permanent account, but Dividends is a temporary account.
Permanent accounts will appear on a post-closing trial balance.
Temporary accounts have a balance for one period only.
   
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" (Retained earnings / Cash) account balance as well
as any debit balance in the "dividends" (Dividends / Supplies) dividends account is transferred from the adjusted trial balance and is used along with
the reported net income (loss)
   
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" (expense/payable) account and credit expense "credit" (debit/credit)
the Salaries "payable" (expense/payable/unearned) account. 
   
The Income Summary account can be defined as which of the following? (Check all that apply.)
 
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
A temporary account
   
Show your understanding of the steps involved in adjusting entries by placing the following
steps in the correct order of preparation.
Your answer is partially correct.
 
1 Prepare an unadjusted trial balance.
4 Prepare financial statements.
2 Journalize and post adjusting entries. The second step is to actually adjust (journalize) and post the adjustments.
3 Prepare an adjusted trial balance.
   
Which of the statements below describe(s) a temporary account? (Check all that apply.)
 
A temporary account is closed at the end of an accounting period.
A temporary account has a balance for only one period.
   
$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.
 
Service revenue would be credited for $700.
unearned revenue would be debited for $700.
   
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 "interest receivable" (Unearned revenue/Accounts receivable/
Cash/lnterest receivable) account and "credit" (debit/credit) the "interest revenue" (Cash/Accounts  receivable/
lnterest revenue/lnterest receivable) account.
   
The closing process takes place at the end (end/beginning) Of an accounting period, after the
adjusted(adjusted/unadjusted) trial balance is prepared and after (after/before) the financial statements arc
after prepared.
   
Explain unearned revenues are by selecting the statements below which are correct. (Check that apply.)
 
They are also called deferred revenues.
They are reported on a balance sheet.
They refer to cash received in advance of performing a service or product.
They are a liability.
   
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.
   
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 revenues (revenues/liabilities)
and their credit balances are transferred to the income statement as well as revenues all of the expenses (expenses/assets)
and their debit (debit/credit) balances.
   
Define the Income Summary account.
 
It is a temporary account used during the closing process to summarize revenues and expenses.
   
Choose the statement(s) below which is (are) true regarding adjusting journal entries. (Check  that apply.)
 
Cash is never affected.
A balance sheet account is always affected
An income statement account is always affected
   
The journal entry to close all Of a company's expense accounts would include a credit (debit/credit) to each
Of the expense accounts and a corresponding debit(debit/credit) to the Income summary (statement/summary) account.
   
List the order in which financial statements are prepared.
 
4             Statement Of cash flows
2             Statement of retained earnings.
1             Income statement
3             Balance sheet
 
Or
 
1             Income statement
2             Statement of retained earnings.
3             Balance sheet
4             Statement Of cash flows
   
Choose the statement below which is true regarding adjusting journal entries.
 
At least one income statement account and one balance sheet account are always involved.
   
Which of the statements below describe(s) a permanent account? (Check all that apply.)
 
A permanent account's balance is carried forward to the next accounting period.
A permanent account can be referred to as a "real" account.
A permanent account is reported on the balance sheet.
   
Demonstrate your knowledge of a depreciation adjusting entry by completing the following sentence.
 
A depreciation adjustment would include a debit to the depreciation expense (depreciation expense) accumulated depreciation [building)
account and a credit (debit/credit) to the accumulated depreciation (depreciation expense/accumulated depreciation/building) account.
   
Which Of the following statements describes the expense recognition (matching) principle? (Check all that apply.)
 
Expenses should be matched in the same accounting period as the revenues that are earned as a result Of those expenses.
Matching Of expenses with revenues is a major part Of the adjusting process.
   
Which of the following statements are true regarding depreciation? (Check all that apply.)
 
Depreciation is recorded as an adjusting entry.
Depreciation is the original cost of an asset minus any residual value and this amount is expensed over its useful life.
Depreciation is the process of allocating the cost of an asset to the period the asset benefits.
Depreciation is recognized at the end of an accounting period.
   
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.
   
The expense recognition (matching) principle aims to record expenses (expenses/assets/liabilities) in the (expenses/revenues/assets)
that are earned as a result of those same accounting period as the revenues costs.
This principle is a major part of the adjusting (timing/adjusting/estimating) process.
   
Which of the lists below contains only permanent accounts?
 
Retained Earnings; Accounts Payable; Accumulated Depreciation
   
Determine which of the following transactions may require adjustments. (Check all that apply.)
 
An advance payment was received from a customer earlier in the month, but only partially
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.
24-month insurance policy was prepaid
   
the entries to close Jefferson
 
A credit to retained earnings for 7,100.
A debit 7,100.
   
The Income Summary account can be defined as which of the following? (Check all that apply.)
 
A temporary account
An account that contains a credit for the sum of all revenues
An account whose balance equals net income or net loss.
An account used during the closing process.
   
Choose the statement below that explains what "closing" means.
 
Closing means to bring an account balance to zero.
   
Identify which group of accounts may require adjustments at the end of the accounting period.
 
Unearned revenue; Supplies; Prepaid rent
   
By the end of the accounting period, employees have earned salaries of $500, but they will nt
be paid until the following pay period. Which Of the following is the proper adjusting entry?
 
Debit Salaries expense for $500.
   
Choose the statement below that demonstrates the correct adjusting entry to recognize depreciation expense on a building.
 
Debit Depreciation expense; credit Accumulated depreciation.
   
Which Of the following statements about the Accumulated depreciation account is (are) correct?
 
Accumulated depreciation is subtracted from its plant asset on the balance sheet.
Accumulated depreciation accumulates the total depreciation taken on an asset since its purchase.
Accumulated depreciation is a contra account.
The Accumulated depreciation account allows the original cost Of the asset to remain in
the plant asset account.
   
Accrual basis accounting is defined as: (Check all that apply.)
 
an accounting system which is consistent with generally accepted accounting principles.
an accounting system that uses the matching principle to determine when to recognize revenues and expenses.
an accounting system that uses the adjusting process to recognize revenues when earned and expenses when incurred.
   
Which of the accounts below would be classified as long-term or fixed assets? (Check all that apply.)
 
Vehicles
Land
Building
Equipment
   
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 accounts receivable and credit services revenue
   
Which Of the following describe the Salaries payable account? (Check all that apply.)
 
It is increased with a credit.
It is reported on the balance sheet.
It is a liability account
   
What is needed in order to figure interest expense? (Check all that apply.)
 
Fraction of year since last payment
Annual interest rate
Principal amount owed.
   
Define the Salaries payable account selecting the appropriate statement below.
 
It reports amounts owed to employees and is a liability.
   
Which of the following accounts would be considered a prepaid expense or prepaid asset account? (Check all that apply.)
 
Prepaid insurance
Supplies
Prepaid rent
   
Cash received from a customer for unearned subscription revenue can initially be recorded as either a(n) "revenue" (revenue/expense)
or a(n) "liability" (liability/expense). No matter how an unearned revenue was revenue initially recorded, after the adjusting entry,
net income will be identical.
   
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:
 
credit services revenue
debit accounts receivable
   
Which Of the following describes accrued revenue? (Check all that apply)
Your answer is partially correct.
 
They refer to revenues that are earned in a period but have not been received and are unrecorded.
Accounts receivable is usually increased when accruing revenues.
They refer to earnings which have been earned but not yet billed.
The adjustment causes an increase in an asset account and an increase in a revenue account.
   
Accounting (with/without) "without" reversing entries for accrued salaries will require a debit to salaries expense,
a debit to a salaries payable and a credit to cash for the first payment of salaries in the next.
   
Which of the following statements accurately explains how to use a worksheet to enter adjustments? (Check all that apply.)
 
Adjustments are entered in a middle column titled Adjustments.
The adjustments column totals must balance before moving on to the Adjusted Trial Balance columns.
Each adjustment is identified by a letter in parentheses that serves as a cross-reference to the debit and credit side Of the adjustment.
As new accounts are added, they are added to the bottom of the worksheet below the other.
   
The revenue recognition principle states that revenue:
 
should be recorded when it is earned
   
Rather than crediting the Unearned rent account for $400 of prepaid rent received from a customer, which Of the following
statements explains an alternate recording procedure to journalize this receipt? (Check all that apply.)
 
Any unused portion of the prepayment still existing at the end of the period will be transferred to the Unearned rent account.
Record receipt with a credit to the Rent revenue account.
   
Describe the effect of the adjusting entry to show the earned amount of a previously recorded unearned revenue on the income
statement and on the balance sheet by choosing the statements below. (Check all that apply.)
 
Total liabilities are reduced.
A revenue account is increased.
A liability (unearned revenue) will be reduced.
Net income is increased.
   
Which of the following adjustments would be required at the end of the period? (Check all that apply.)
 
unearned (deferred) revenues
Accrued revenues
Prepaid (deferred) expenses
Accrued expenses
   
Describe the effect of an accrued revenue adjustment on the income statement and the balance
sheet by choosing from the statements below. (Check all that apply.)
 
Net income is increased.
An asset will be increased.
Total assets will be increased.
A revenue account will be increased.
   
 
On December 31, AB Consulting recorded two days' wages of $100 in an adjusting entry which
included a debit to Wages Expense and a credit to Wages Payable. On January 1, the
accountant prepared a reversing entry which included which Of the following?
 
Debit Wages Payable $100; credit Wages expense $100
   
Which of the following statements describes why accrual accounting better reflects a business's
performance? (Check all that apply.)
 
Expenses are always recognized in the period in which they are incurred.
Comparability of financial statements is improved.
Revenues are always recorded in the period in which they are earned.
   
Explain your understanding of what an accrued expense is by selecting the statements below which are correct. (Check all that apply.)
 
Examples of accrued expenses are wages expense and interest expense.
Adjustments involve increasing both an expense and a liability account.
They refer to costs that are incurred in a period, but are both unpaid and unrecorded.
the are reported on the income statement
   
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.)
 
Cash would be credited for $4,000.
Salaries expense would be debited for $3,500.
salaries payable will be debited for $500
   
When is a reversing entry made?
 
It is made on the first day of a new accounting period.
   
Identify the statement(s) below which is (are) correct regarding the use of estimates in accounting. (Check all that apply.)
X Sorry, your answer is incorrect.
 
When following the matching principle, sometimes estimates are used because the actual expense or revenue amount is not yet known.
Matching expenses with revenues often requires us to predict certain events which we are not always able to do.
   
Mouse Inc. uses the alternative method of accounting for prepayments and purchased a $1,200, 6-month insurance policy.
The company immediately debited the Insurance expense account. By the end of the period, $400 of the policy had expired.
Demonstrate the required adjustment needed at the end of the period.
 
Debit Prepaid insurance $800.
   
What is the date primarily used in adjusting entries?
 
The last day of the period
   
A reversing entry can be described as a(n): (Check all that apply.)
 
entry that is recorded in response to an adjusting entry made in the previous reporting period.
entry whose purpose is to simplify a company's record keeping.
an optional entry.
entry that is the exact opposite of an accrual adjusting entry.
   
Which Of the following is (are) true regarding timeliness and the importance of periodic reporting? (Check all that apply.)
 
The value of information is often linked to its timeliness.
Businesses report financial information at regular intervals to ensure timeliness of data.
Useful information must reach decision makers frequently and promptly.
   
Which of the following could be a logical or realistic accounting period for a business that is creating financial statements?
(Check all that apply.)
 
Six-month period
One-month period
One-year period
   
What is the effect Of an accrued expense (such as salaries expense) adjustment on the income statement and the balance sheet?
(Check all that apply.)
 
A liability (such as salaries payable) will be increased.
Expenses are increased
Net income is reduced
   
At the end of the previous year, a customer owed Chocolates R IJS $500. On January 31 of the current year, the customer paid $900 total,
which included the $500 owed plus $400 owed for the current month of January.
What would be the journal entry on January 31 that reflects this?
 
Accounts receivable will be credited for $500. 
Cash will be debited for $900.
Service revenue would be credited for $400.
   
A prepaid expense (such as supplies or prepaid rent) can initially be recorded as either an expense or as an asset.
Demonstrate your understanding of adjusting for prepaid expenses by selecting the statement that is correct.
 
No matter how a prepaid expense was initially recorded, after adjustment, the financial statements will be identical.
   
Rather than crediting the Unearned rent account for $400 Of prepaid rent received from a customer,
which of the following statements explains an alternate recording procedure to journalize this receipt? (Check all that apply.)
 
Any unused portion of the prepayment still existing at the end of the period will be
Record receipt with a credit to the Rent revenue account.
   
Describe the effect of an accrued revenue adjustment on the income statement and the balance sheet by choosing from the
statements below. (Check all that apply.)
 
Total assets will be increased.
An asset will be increased.
Net income is increased.
A revenue account will be increased.

    Homework   1.1  1.2   2.1  2.2  3.1  3.2   4.1  4.2  5.1  5.2   6.1   6.2  7.1  7.2  8.1  8.2  9.1  9.2  10.1   10.2  11.1   11.2  12.1  12.2   13.1  13.2