Exam 3: The Adjusting Process

For the year ending December 31, Orion, Inc. mistakenly omitted adjusting entries for $1,500 of supplies that were used, (2) unearned revenue of $4,200 that was earned, and (3) insurance of $5,000 that expired. For the year ending December 31, what is the effect of these errors on revenues, expenses, and net income?

Match the type of account (a - e) with the business transactions that follow. -Paid for a 6-month magazine subscription. A)Prepaid expense B)Accrued expense C)Unearned revenue D)Accrued revenue E)None of these

Accrued salaries of $600 owed to employees for December 29, 30, and 31 are not taken into consideration in preparing the financial statements for the year ended December 31. Indicate which items will be erroneously stated, because of the error, on (a) the income statement for the year and (b) the balance sheet as of December 31. Also indicate whether the items in error will be overstated or understated.

Identify the effect (a - h) that omitting each of the following items would have on the balance sheet.a.Assets and stockholders' equity overstated b.Assets and stockholders' equity understated c.Assets overstated and stockholders' equity understated d.Assets understated and stockholders' equity overstated e.Liabilities and stockholders' equity overstated f.Liabilities and stockholders' equity understated g.Liabilities overstated and stockholders' equity understated h.Liabilities understated and stockholders' equity overstated -No adjustment was made for supplies used up during the month.

For the year ending December 31, Beard Clinical Supplies Co. mistakenly omitted adjusting entries for (1) $9,800 of unearned revenue that was earned, (2) earned revenue that was not billed of $10,200, and (3) accrued wages of $7,000. Indicate the combined effect of the errors on (a) revenues, (b) expenses, and (c) net income.

Even though GAAP requires the accrual basis of accounting, some businesses prefer using the cash basis of accounting.

Adjusting entries are

The matching principle requires expenses be recorded in the same period that the related revenue is recorded.

The cash basis of accounting records revenues and expenses when the cash is exchanged while the accrual basis of accounting

Unearned revenue is a liability.

The adjusting entry to record the depreciation of a building for the fiscal period is

Accumulated depreciation accounts are liability accounts.

Match the type of account (a - e) with the business transactions that follow. -Received payment covering a 6-month magazine subscription. A)Prepaid expense B)Accrued expense C)Unearned revenue D)Accrued revenue E)None of these

A company pays an employee $3,000 for a five-day work week, Monday-Friday. The adjusting entry on December 31, which is a Wednesday, is a debit to Wages Expense, $1,800, and a credit to Wages Payable, $1,800.

Which of the following is considered to be unearned revenue?

A vertical analysis of two income statements for Danielle's Design Services is shown below: *Differences due to rounding Which of the following analyses reflect the data given?

Prior to the adjusting process, accrued expenses have

How will the following adjusting journal entry affect the accounting equation?

The difference between the balance of a fixed asset account and the balance of its related accumulated depreciation account is termed the book value of the asset.

A contra asset account for Land will normally appear on the balance sheet.