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Exam 3: Adjusting Accounts and Preparing Financial Statements

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Question 21

Multiple Choice

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The adjusting entry to record an accrued expense is:

A) Increase an expense; increase a liability.
B) Increase an asset; increase revenue.
C) Decrease a liability; increase revenue.
D) Increase an expense; decrease an asset.
E) Increase an expense; decrease a liability.

F) A) and C)
G) B) and E)

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Question 22

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Adjusting entries result in a better matching of revenues and expenses for the period.

A) True
B) False

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Question 23

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______________________ are required at the end of the accounting period because certain internal transactions and events remain unrecorded.

______________________ revenues are liabilities requiring delivery of products and for services.

Companies experiencing seasonal variations in sales often choose a fiscal year corresponding to their ________________________ year.

Failure to record depreciation expense will overstate the asset and understate the expense.

All of the following are True regarding prepaid expenses except:

A balance sheet that places the liabilities and equity to the right of the assets is a(n) :

All of the following statements regarding profit margin are true except:

On October 15, a company received $15,000 cash as a down payment on a consulting contract. The amount was credited to Unearned Consulting Revenue. By October 31, 10% of the services required by the contract were completed. The company will record consulting revenue of $1,500 from this contract for October. Revenue = $15,000 x 10% = $1,500

Under the accrual basis of accounting, adjustments are often made for prepaid expenses and unearned revenues.

A company pays each of its two office employees each Friday at the rate of $100 per day for a five-day week that begins on Monday. If the monthly accounting period ends on Tuesday and the employees worked on both Monday and Tuesday, the month-end adjusting entry to record the salaries earned but unpaid is:

During the current year ended December 31, clients paid fees in advance for accounting services amounting to $25,000. These fees were recorded in an account called Unearned Accounting Fees. If $3,500 of these fees remain unearned on December 31 of this year present the December 31 adjusting entry to bring the accounts up to date.

Barnes Company has 20 employees who are each paid $80 per day for a 5-day workweek. The employees are paid each Friday. This year the accounting period ends on Tuesday. Prepare the December 31 year-end adjusting journal entry Barnes Company should make to accrue wages.

______________________ basis accounting means that revenues are recognized when cash is received and that expenses are recorded when cash is paid. ________________________ basis accounting means that the financial effects of revenues and expenses are recorded when earned or incurred.

Adjusting entries are made after the preparation of financial statements.

What are the types of adjusting entries used for accrued expenses and accrued revenues?

The unadjusted trial balance and the adjustment data for Harris Training Institute are given below along with adjusting entry information. What is the impact of the adjusting entries on the balance sheet? Show calculation for total assets, total liabilities, and owner's equity without the adjustments; show calculation for total assets, total liabilities, and owner's equity with the adjustments. Which one gives the most accurate presentation of the balance sheet? Additional information items: a. The Prepaid Insurance account consists of a payment for a 1 year policy. An analysis of the insurance invoice indicates that one half of the policy has expired by the end of the December 31 year-end. b. A cash payment for space sublet for 8 months was received on July 1 and was credited to Unearned Rent. c. Accrued interest expense on the note payable of $1,000 has been incurred but not paid.

The difference between the cost of an asset and the accumulated depreciation for that asset is called

The balance in the prepaid insurance account before adjustment at the end of the year is $4,800, which represents the insurance premiums for four months. The premiums were paid on November 1. The adjusting entry required on December 31 is: