Exam 3: Adjusting the Accounts

An adjusting entry recording accrued salaries for a period indicates that Salaries Expense has been ________________ but has not yet been ________________ or recorded.

Failure to adjust a prepaid expense account for the amount expired will cause ______________ to be understated and ________________ to be overstated.

An accounting period that is one year in length is referred to as a ______________ year.

A company's calendar year and fiscal year are always the same.

Under International Financial Reporting Standards (IFRS) revenues occur when assets are used up or when liabilities are incurred to generate revenue.

Ron's Hot Rod Shop follows the revenue recognition principle.Ron services a car on July 31.The customer picks up the vehicle on August 1 and mails the payment to Ron on August 5.Ron receives the check in the mail on August 6.When should Ron show that the revenue was earned?

Action Real Estate received a check for $18,000 on July 1 which represents a 6 month advance payment of rent on a building it rents to a client.Unearned Rent was credited for the full $18,000.Financial statements will be prepared on July 31.Action Real Estate should make the following adjusting entry on July 31:

Wave Inn is a resort located in Canada.Wave Inn collects cash when guests make a reservation.During December 2011, Wave Inn collected $60,000 of cash and recorded the receipt by recognizing unearned revenue.By the end of the month Wave Inn had earned one third of this amount, the other two third will be earned during January 2012.The adjusting entry required at December 31, 2011 would impact the statement of financial position by

An adjusting entry always involves two statement of financial position accounts.

A liability-revenue relationship exists with

Accumulated Depreciation is a liability account and has a credit normal account balance.

Unearned revenue is a prepayment that requires an adjusting entry when services are performed.

Financial statements can be prepared from the information provided by an adjusted trial balance.

An asset-expense relationship exists with

Income will always be greater under the cash basis of accounting than under the accrual basis of accounting.

Expenses incurred but not yet paid or recorded are called

A liability-revenue account relationship exists with an unearned rent revenue adjusting entry.

Adjusting entries can be classified as

Wave Inn is a resort located in Canada.During December 2011 Spin Jammers held its annual conference at the resort.The charges related to the conference total $340,000, of which 25% has been paid by Spin Jammers.When Wave Inn makes the appropriate adjusting entry, which of the following is part of the adjustment made to its December 31, 2011 statement of financial position?

Every adjusting entry affects one statement of financial position account and one income statement account.