Exam 3: The Adjusting Process

The advance cash receipts of future revenues are called ________.

The asset account, Office Supplies had a beginning balance of $5,400. During the accounting period, office supplies were purchased, on account, for $5,400. A physical count, on the last day of the accounting period, shows $2,300 of office supplies on hand. What is the amount of Supplies Expense for the accounting period?

Classic Artists' Services signed a contract with a maintenance service company to maintain a building that Classic will use for office purposes. The contract states that the work will begin work on February 1 and end on May 31. Classic Artists' will pay the maintenance service company $16,000 at the end of May. It accrues Maintenance Expense at the end of every month. What is the balance in the Accounts Payable account for amounts owed to the maintenance service company at the end of March?

The employees of Leicester Services Company worked the last two weeks of December, 2016. They received their paychecks on January 2, 2017. Which of the following accounts should appear on the income statement for the year ended December 31, 2016?

Accumulated Depreciation is a(n) ________ account and carries a normal ________ balance.

Adjusting entries are needed to correctly measure the ________.

Downs Tax Planning Service bought communications equipment for $9,600 on January 1, 2017. It has an estimated useful life of five years and zero residual value. Downs 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 balance in the Accumulated Depreciation account for this equipment is ________.

Melville Services has a weekly payroll of $50,000. December 31, 2016 falls on Thursday and Melville will pay its employees the following Monday (January 4, 2017) for the previous full week. Assume that Melville has a five-day workweek and has an unadjusted balance in Salaries Expense of $845,000. Prepare the January 4, 2017 journal entry. Reversing entries are not made.

Which of the following entries would be made as the result of the revenue recognition principle?

On October 1, 2016, Smith Service Company paid $5,000 in rent for the next five months, beginning with October 2016. On that date, Smith debited Prepaid Rent and credited Cash. If Smith fails to make an adjusting entry on December 31, 2016, indicate the effect on assets, liabilities, equity, and net income.

If an adjusting entry includes a debit to Rent Expense, it indicates that the payment of rent had been previously recorded as a(n) ________.

Contra asset accounts, such as Accumulated Depreciation, always have normal debit balances.

Under accrual basis accounting, revenue is recorded only when cash is received.

Which of the following accounting elements does the matching principle help to match?

Viva Company bought machine X for $18,000 two years ago. The machine had no residual value and had an estimated useful life of 10 years. If the company uses the straight-line depreciation method, calculate the current book value of the machine.

Prepaid Rent is an expense account that appears on the income statement.

Revenue is earned when the business has ________.

A contra account's normal balance (debit or credit) is the opposite of the normal balance of the related account.

The cash basis of accounting ignores ________.

At Sea, a cruise industry magazine, collected $480,000 in subscription revenue in May. Each subscriber will receive an issue of the magazine for each of the next 12 months, beginning with the June issue. The company uses the accrual basis of accounting. Provide the adjusting entry needed on June 30. (Ignore explanation.) Assume the magazine initially records a liability for the subscription revenue.