Exam 3: The Adjusting Process

A company receives payment from one of its customers on August 5 for services performed on July 21. Which of the following entries would be recorded if the company uses accrual basis accounting?

The sum of all the depreciation expenses recorded to date for a depreciable asset is called residual value.

Luminous Electrical performed services of $8,000 on January 24 and invoiced the customer. Luminous received the $8,000 on January 31. Provide the journal entry on January 24 when services were performed. (Ignore explanation.)

On December 31, 2016, interest of $1,500 has accrued on a bank note. This interest payment is due on January 20, 2017. If no adjusting entry is made on December 31, 2016, indicate the effect on assets, liabilities, equity, and net income.

The goal of the time period concept is to compute an accurate net income or net loss.

Hank's Tax Planning Service started business in January 2016. The company rented an office for $1,800 per month starting from January 1, 2016. On that day, Hank prepaid the rent through June 30. The company makes adjusting entries at the end of each month. What is the balance in the Prepaid Rent account as of April 30, 2016?

The accounting records for Patricia Event Planning Services include the following select unadjusted balances on December 31, 2016: Salaries Expense, $6,000; Service Revenue: $19,000; Unearned Revenue, $400; Supplies Expense, $600; Rent Expense, $300; Depreciation Expense-Equipment, $200. During December, the company worked with a new client and provided event planning services for an upcoming event. It will receive the full amount of $2,100 when the event is completed in January 2017. As of the end of December 2016, it performed one-third of the services covered by the contract. The company made the accrual adjustments. The balance of Service Revenue, as shown on the adjusted trial balance, should be a ________.

Qwerty Company prepaid $8,400 on November 1, 2014 for a one-year insurance premium. On January 1, 2015 of the next year (after December 31 adjustments), the Prepaid Insurance account will have a debit balance of ________. (Round any intermediate calculations to two decimal places, and your final answer to the nearest whole number.)

A business hired a repair service to overhaul its plumbing system. The repair service began work on September 15 and intends to complete it on October 15. The business will pay the repair service $4,000 when the work is completed. As of September 30, the work was 50% complete. Provide the adjusting entry to accrue repair expense by the end of September. (Ignore explanation.)

The accounting period used for the annual financial statements is called the fiscal year.

The accountant for Belden Jewelry Repair Services forgot to make an adjusting entry for Depreciation Expense for the current year. Which of the following is an effect of this error?

If a company fails to make an adjusting entry for deferred expense, the assets will be overstated. Assume the deferred expense is initially recorded as an asset.

When does a company account for revenue if it uses cash basis accounting?

The accountant for Hobson Electrical Repair failed to make an adjusting entry to record $5,000 of unpaid salaries for the last two weeks of the year. Which of the following statements is true?

Stancil Enterprises prepaid four months of office rent totaling $8,100 on October 1, 2017. Assuming Stancil records deferred expenses using the alternative treatment, what would be the adjusting entry recorded on December 31, 2017?

Unearned Revenue is a(n) ________ account and carries a normal ________ balance.

The accountant of Skyscrapers Architectural Services failed to make an adjusting entry to record $7,000 of depreciation expense. Which of the following statements is true?

On December 15, Duncan Services Company collected revenue of $3,000 in advance from a new client, and agreed to provide services to the client for the period of December 15 through January 15 of the following year. Assume that the company records deferred revenues using the alternative treatment, and journalize the adjusting entry recorded on December 31.

On January 1, Ogden Company had $1,500 of supplies on hand. During January, Ogden purchased $5,500 worth of new supplies. At the end of the month, a count revealed $600 worth of supplies remaining on the shelves. The adjusting entry needed will include a debit to Supplies Expense of $6,400. The supplies were initially recorded as an asset.

In the case of a deferred expense, the adjusting entry required at the end of a period will consist of a debit to the Prepaid Expense account. Assume the deferred expense was initially recorded as an asset.