Exam 3: The Adjusting Process

In the case of deferred revenue, the cash is received first, and the revenue is earned later.

At the time the transaction occurred, which of the following would result in an increase in net income under the accrual basis of accounting, but would not result in an increase in net income under cash basis accounting?

Under cash basis accounting, an expense is recorded only when cash is paid.

On December 31, 2016, $2,500 of salaries have been earned but not yet paid to employees. If the business failed to make an adjusting entry on December 31, 2016, indicate the effect on assets, liabilities, equity, and net income.

The accountant of Delta Company failed to make an adjusting entry to record $6,000 of unearned service revenue that has now been earned. Assume the deferred revenue was initially recorded as a liability. Which of the following statements is true?

Deferred expenses are also called prepaid expenses.

On January 1, Unearned Revenue of Grossman Company had a beginning balance of $1,400. During January, the company earned $700 of the deferred revenue. The company also collected $4,000 from a new customer for services to be performed the following month. At the end of January, the Unearned Revenue account should have a balance of $4,000.

To match expenses against revenues means to ________.

A company received $5,000 for 100 one-year subscriptions on July 1. The journal entry to record this cash receipt would include a ________. The company uses a liability account for revenue received in advance.

The accounts that are used in a worksheet are taken from and listed in the same order as the ________.

On January 1, 2015, the Accounts Receivable of Linda Company had a debit balance of $150,000. During January, the company provided services for $600,000 on account. The company collected $230,000 from its customers on account in January. What was the ending balance in the Accounts Receivable account at the end of January?

Bryan Consultants had the following balances before preparing adjusting entries in the books on December 31, 2017. Prepare the adjusted trial balance after considering these adjustments: a. Office Supplies used, $800. Assume the office supplies were initially recorded as an asset. b. Accrued salaries on December 31, $600. c. Revenue earned but not recorded, $200.

The accountant for Sparks Electric failed to make an adjusting entry to record $3,000 of telephone expenses for the last two months of the year. Which of the following statements is true?

DeLito Tax Planning Service bought production equipment for $11,400 on January 1, 2017. It has an estimated useful life of five years and zero residual value. DeLito uses the straight-line method to calculate depreciation and records depreciation expense in the books at the end of every month. As of June 30, 2017, the book value of this equipment shown on its balance sheet will be ________.

An adjusted trial balance does not list the revenues and expenses of a business.

The allocation of a plant asset's cost to expense over its useful life is called ________.

What is the difference between cash basis accounting and accrual basis accounting?

Under accrual basis accounting, an expense is recorded only when cash is paid.

Which of the following is the correct formula for calculating depreciation under the straight-line method?

Financial statements are prepared from the balances in a(n) ________.