Exam 3: The Adjusting Process

Adjusting entries either credit a revenue account or debit an expense account.

Deferred revenues are assets because the business has collected the cash before earning the revenue.

Saturn Services Company signed a one-year $24,000 note payable at 8% interest on May 1, 2017. How much interest expense must be accrued on May 31, 2017? (Round any intermediate calculations to two decimal places, and your final answer to the nearest whole number.)

The accounting principle that ensures all expenses are recorded during the period when they are incurred and offsets those expenses against the revenues of the period is called the ________ principle.

The time period concept states that ________.

The asset account, Office Supplies, had a beginning balance of $3,900. During the accounting period, office supplies were purchased, on account, for $2,600. Supplies Expense for the accounting period is $4,500. What is the ending balance of Office Supplies?

Which of the following is a contra account?

Bryson Accounting Services performed accounting services for a client in December. A bill was mailed to the client on December 30. The company received a check by mail on January 5. Which of the following accounts should appear on the balance sheet as of December 31 as related to the services performed?

On June 1, Edison Company borrowed $24,000 on a one-year Note Payable with an interest rate of 10% per year. It will repay the principal and interest at the end of the one-year period. The company makes accrual adjustments at the end of each month. The company should record interest expense of $2,400 on June 30.

The following extract was taken from the worksheet of Dutch Company for the year 2016. Dutch Company Worksheet December 31, 2016 From the above information, determine the amount of the Rent Expense adjustment.

Which of the following is considered a fiscal year?

Recipes, Inc. purchased $2,000 of supplies on account. Under the accrual basis of accounting, no entry is made until the amount is paid.

On September 1, Capitol Maintenance Company contracted to provide monthly maintenance services for the next seven months at a rate of $2,300 per month. The client paid Capitol $16,100 on September 1. The maintenance services began on that date. Assuming Capitol records deferred revenues using the alternative treatment, what would be the adjusting entry recorded on December 31?

Prepaid Insurance is an asset account that appears on the balance sheet.

On July 1, Alpha Company prepaid rent for a small equipment storage area. Alpha paid $20,000 to rent the area from July 1 through the end of the year. Provide the journal entry needed on July 1 when the payment is made. (Ignore explanation.) Assume the deferred expense is initially recorded as an asset.

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

If a company is using accrual basis accounting, when should it record revenue?

The matching principle is also called the ________.

The worksheet is a useful step in preparing adjusting entries and the unadjusted trial balance.

Which of the following entries would be made because of the matching principle?