Exam 3: The Adjusting Process

The accountant for Wilson Consulting Company failed to make an adjusting entry to record $3 000 of unearned service revenue that has now been earned. Which of the following is TRUE?

Which of the following situations would result in an increase in income under the accrual method of accounting, but would NOT result in an increase in income under the cash- basis method of accounting?

If supplies have been used up during the accounting period, the correct adjusting entry would be:

Which of the following is a contra account?

Unearned revenue would be classified as a(n)account.

Real Losers, a diet magazine, collected $360 000 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 method of accounting. By the end of December, how much Subscription revenue has been earned?

The accountant for Hobson Electrical Repair Company 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 is TRUE?

Profit from the income statement is reported in the assets section of the balance sheet.

The accountant for Duman Legal Services failed to make an adjusting entry for supplies that had been used for the year. Which of the following is TRUE?

The beginning balance in the Supplies account was $3 000. Purchases of supplies during the year were $25 000. The business makes adjusting entries for supplies once a year. A count of supplies at year- end revealed that the ending balance in the Supplies account should be $1 500. What is the amount of the adjusting entry?

Hank's Tax Planning Service bought communications equipment for $7 200 on 1 January 2013. It has an estimated useful life of 5 years. Hank records depreciation monthly. As of 30 June 2013, the balance in the Accumulated depreciation account for this equipment is:

Pattie's Event Planning Service has just prepared the unadjusted trial balance, which shows the following balances: Salary expense: Debit $8 000 Service revenues: Credit $3 000 Interest expense: 0 On the first day of January, Pattie borrowed $1 800 on a one- year loan payable charging interest at 4% per year. The loan specifies that principal and interest is to be paid in full at the end of the One- year period. On 30 June, the adjusted trial balance will show what amount for Interest expense?

What is the effect of the adjusting entry for Depreciation expense?

To accrue revenue means that the cash receipt is recorded before the revenue is earned.

Financial statements are prepared from a(n):

The owner of Recipes.org purchases $2 000 of supplies on credit. Under the accrual basis of accounting, no entry is made until the $2 000 is paid.

Under cash- basis accounting, revenue is recorded when it is earned, regardless of when cash is received.

Under accrual basis accounting, an expense is recorded ONLY when the cash is paid out.

In cash- basis accounting, revenue is recognised when cash is received and expenses are recognised when they are paid.

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