Exam 3: The Adjusting Process

Two income statements for Danielle's Design Services are shown below.​ (a) Prepare a vertical analysis of Danielle's Design Services income statements. (b) What types of trends are indicated: favorable or unfavorable? (c) What other information would enhance the analysis?

Revenues and expenses should be recorded in the same period to which they relate.

The following adjusting journal entry does not include an explanation. Select the best explanation for the entry. Supplies Expense 730 Supplies 730 ????????????????

Salaries of $6,400 are paid for a five-day week on Friday. Prepare the adjusting journal entry that is required if the month ends on Thursday.

Which of the following is the proper adjusting entry, based on a prepaid insurance account balance before adjustment of $14,000 and unexpired insurance of $3,000, for the fiscal year ending on April 30?

A one-year insurance policy was purchased on June 1 for $2,400. The adjusting entry on December 31 would be: Date Description Post. Ref. Debit Credit

At the end of April, the first month of the company's year, the usual adjusting entry transferring rent earned to a revenue account from the unearned rent account was omitted. Indicate which items will be incorrectly stated, because of the error, on (a) the income statement for April and (b) the balance sheet as of April 30. Also indicate whether the items in error will be overstated or understated.

A company realizes that the last two days' revenue for the month was billed but not recorded. The adjusting entry on December 31 is a debit to Accounts Receivable and a credit to Fees Earned.

Identify the effect (a through h) that omitting each of the following items would have on the balance sheet. -Services provided to customers on the last day of the month were not billed.

Complete the missing items in this summary of adjustments chart:

The accounting principle upon which deferrals and accruals are based is

Match the type of account (a through e) with the business transactions that follow. -Paid six months of rental payments to the landlord.

Indicate whether the following error would cause the adjusted trial balance totals to be unequal. If the error would cause the adjusted trial balance totals to be unequal, indicate whether the debit or credit total is higher and by how much.​The entry for $975 of supplies used during the period was journalized as a debit to Supplies Expense for $795 and credit to Supplies for $975.

What is the purpose of the adjusted trial balance?

The entry to adjust the accounts for salaries accrued at the end of the accounting period is

All of the following statements regarding vertical analysis are true except

Explain the difference between the accrual basis of accounting and the cash basis of accounting.

On December 31, a business estimates depreciation on equipment used during the first year of operations to be $2,900. (a) Journalize the adjusting entry required on December 31. (b) If the adjusting entry in (a) were omitted, which items would be erroneously stated on (1) the income statement for the year and (2) the balance sheet as of December 31?

The adjusted trial balance verifies that total debits equal total credits before the adjusting entries are prepared.

Which of the following accounts would likely be included in a deferral adjusting entry?