Exam 3: Adjusting the Accounts

Wave Inn is a resort located in Canada. During December 2013 Wave Inn collects $150,000 cash related to a conference booked by the Spin Jammers. The conference is scheduled for February 12 and 13, 2014. Which of the following is true regarding how this transaction is reported on the December 31, 2013 statement of financial position?

Cara, Inc. purchased a building on January 1, 2014 for ₤ 800,000. The useful life of the building is 10 years. What impact will the appropriate adjusting entry at December 31, 2014 have on its statement of financial position at December 31, 2014?

An expense is recorded under the cash basis only when

The periodicity assumption states that the economic life of a business can be divided into

Every adjusting entry affects one statement of financial position account and one income statement account.

A liability-revenue relationship exists with

Accrued revenues are revenues which have been received but not yet earned.

Bee-In-The-Bonnet Company purchased office supplies costing $8,000 and debited Supplies for the full amount. At the end of the accounting period, a physical count of supplies revealed $2,200 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be

Turner Company collected $13,000 in September of 2013 for 5 months of service which would take place from October of 2013 through February of 2014. The revenue reported from this transaction during 2013 would be

Bread Basket provides baking supplies to restaurants and grocery stores. During December 2014, Bread Basket's employees worked 2,400 hours at an average rate of €10 per hour. At December 31, 2014, Bread Basket has paid €14,000 of salary expense. If Bread Basket fails to make the appropriate adjusting entry, which of the following is true regarding its December 31, 2014 statement of financial position?

Types of adjusting entries include deferral of unearned revenue, which requires the company to record a liability on the statement of financial position.

For each of the following accounts, indicate (a) the type of adjusting entry (prepaid expense, accrued revenue, etc.) and (b) the related account in the adjusting entry. 1. Depreciation Expense 2. Salaries and Wages Payable 3. Accounts Receivable 4. Supplies 5. Unearned Service Revenue

The time period assumption states that

Rent received in advance and credited to a rent revenue account which is still unearned at the end of the period, will require an adjusting entry crediting a liability account for the amount still unearned.

Expenses paid and recorded in an asset account before they are used or consumed are called ______________. Revenue received and recorded as a liability before it is recognized is referred to as ______________.

Rhodes National purchased software on October 1, 2014 for ₤18,000. The company expects to use the software for 3 years. It has no residual value. 1. What adjusting journal entry should the company make at the end of each month if monthly financials are prepared? (annual depreciation is ₤6,000) 2. What balance will be reported on the December 31, 2014 statement of financial position for Accumulated Depreciation?

An adjusting entry for accrued revenues increases an asset account on the statement of financial position and increases a revenue account on the income statement.

Relevant accounting information

As prepaid expenses expire with the passage of time, the correct adjusting entry will be a

The expense recognition principle states that expenses should be matched with revenues. Another way of stating the principle is to say that