Exam 5: Adjusting Entries and the Work Sheet

Journalize the necessary year-end adjusting entries based on the following account balances before adjustments. a. The inventory of supplies on hand at December 31, 20--, was $230. b. The 4-month insurance premium of $1,800 was purchased on December 1, 20--. c. The $34,000 of equipment was purchased on January 1, two years ago. It has a salvage value of $2,000. Straight-line depreciation was used to compute depreciation at the end of last year. d. Wages accrued at December 31, 20--, were $3,700.

A contra-asset appears on the income statement.

When assets are recorded at original value, they are recorded under the

The cost of plant assets less the accumulated depreciation is called the salvage value of the asset.

Net income is shown on the work sheet as a

If the total credits exceed total debits in the Income Statement columns of the work sheet, the business has had net income.

In completing the work sheet, what is the reason for adding the net income for the year to the Balance Sheet Credit column?

A contra-account is used with a related account to bring about an increase in the net amount of the two account balances.

The cash basis of accounting and the accrual basis of accounting result in the same measures of net income.

If a business records revenue when it is received and records the purchase of a building as an asset and makes adjustments to allocate the cost of the building over many accounting periods, the business accounting system is a(n)

Match the terms with the definitions. -A method of matching an asset's original cost against the revenues produced over its useful life.

Match the terms with the definitions. -Journal entries made at the end of the accounting period to reflect changes in account balances that are not the direct result of an exchange with an outside party.

The modified cash basis of accounting combines aspects of the cash method of accounting and the accrual method of accounting.

Plant assets provide benefits over a long period of time.

If a business records revenues when earned, regardless of whether cash has been received, and records expenses when they are incurred, the accounting system is a(n)

____________________ is a method of matching an asset's original cost against the revenues produced over its useful life.

Compute the following: a. Carder & Company purchased equipment for $24,000 with a useful life of eight years and no expected salvage value. Prepare the adjusting entry for the first year using the straight-line depreciation method and compute the book value at the end of the second year of the equipment's life. b. DAC Company pays its employees every Friday. On January 2, 20--, the Company paid $6,000 for the 5 days beginning the previous December 29. Prepare the adjusting entry on December 31.

The business or professional person using the cash basis of accounting takes the view that there is no revenue until it is received in such a form that it can be spent.

The Income Statement columns of a work sheet include all revenue and expense accounts.

Match the terms with the definitions. -The expected market value of an asset at the end of its useful life.