A) At the end of one accounting period result in cash receipts in a future period. B) Are listed on the balance sheet as liabilities. C) At the end of one accounting period often result in cash payments in the next period. D) Are recorded at the end of an accounting period because cash has already been received for revenues earned. E) Are also called unearned revenues. A) At the end of one accounting period result in cash receipts in a future period. B) Are listed on the balance sheet as liabilities. C) At the end of one accounting period often result in cash payments in the next period. D) Are recorded at the end of an accounting period because cash has already been received for revenues earned. E) Are also called unearned revenues.

Exam 3: Adjusting Accounts and Preparing Financial Statements

On December 31, Winters Company's Prepaid Rent account had a balance before adjustment of $6,000. Three months' rent was paid in advance on December 1, the first day of the lease term. The adjusting entry needed on December 31 is:

(Multiple Choice)

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Question 101

The accrual basis of accounting reflects the principle that revenue is recorded when it is earned, not when cash is received.

(True/False)

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Question 102

What is an adjusted trial balance? Why is it prepared?

(Essay)

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Question 103

The main purpose of adjusting entries is to:

(Multiple Choice)

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Question 104

It is acceptable to record prepayment of expenses as debits to expense accounts if an adjusting entry is made at the end of the period to bring the asset account balance to the correct unused or unexpired amount.

(True/False)

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Question 105

On July 1 Plum Co. paid $7,500 cash for management services to be performed over a two-year period. Plum follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. On July 1 Plum should record:

(Multiple Choice)

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Question 106

The accrual basis of accounting:

(Multiple Choice)

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Question 107

If accrued salaries were recorded on December 31 with a debit to Salaries Expense and a credit to Salaries Payable, and no reversing entries were made on January 1, the entry to record payment of these wages on the following January 5 would include:

(Multiple Choice)

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Question 108

Profit margin is calculated by dividing net sales by net income.

(True/False)

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Question 109

Accrued expenses at the end of one accounting period are expected to result in cash payments in a future period.

(True/False)

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Question 110

On October 1, Goodwell Company rented warehouse space to a tenant for $2,500 per month and received $12,500 for five months' rent in advance on that date, with the lease beginning immediately. The cash receipt was credited to the Unearned Rent account. The company's annual accounting period ends on December 31. The Unearned Rent account balance at the end of December, after adjustment, should be:

(Multiple Choice)

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Question 111

The periodic expense created by allocating the cost of plant and equipment to the periods in which they are used, representing the expense of using the assets, is called:

(Multiple Choice)

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Question 112

Accumulated depreciation is shown on the balance sheet as a subtraction from the cost of its related asset.

(True/False)

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Question 113

Explain the purpose of adjusting entries at the end of a period and provide an example of an adjusting entry.

(Essay)

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Question 114

Accrued revenues:

(Multiple Choice)

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Question 115

Match the appropriate definition with the following terms.

The accounting system that uses the adjusting process to recognize revenues when earned and expenses when incurred.

Time period assumption

The accounting system that recognizes revenue when cash is received and records expenses when cash is paid.

Accrued revenues

The process of allocating the costs of long-term assets to the income statement over their expected useful lives.

Interim financial statements

Correct Answer:

Verified

The accounting system that uses the adjusting process to recognize revenues when earned and expenses when incurred.

The accounting system that recognizes revenue when cash is received and records expenses when cash is paid.

The process of allocating the costs of long-term assets to the income statement over their expected useful lives.

A set of financial statements that covers less than one year, typically one, three, or six months of activity.

Assumes that an organization's activities can be divided into specific time periods such as months, quarters, or years.

Revenues earned in a period that are both unrecorded and not yet received in cash or other assets.

Aims to record expenses in the same accounting period as the revenues that are earned as a result of those expenses.

Any 12 consecutive months or 52-week period that a company adopts for its annual reporting period.

A method that allocates equal amounts of an asset's cost (less any salvage value)to depreciation expense during its useful life.

(Matching)

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Question 116

Asset and liability balances are transferred from the adjusted trial balance to the balance sheet.

(True/False)

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Question 117

On May 1, Sellers Marketing Company received $1,500 from Franco Marcelli for a marketing campaign effective from May 1 this year to April 30 of the following year. The Cash receipt was recorded as unearned fees and at year-end on December 31, $1,000 of the fees had been earned. Assuming adjustments are only made at year-end, the adjusting entry on December 31 would be:

(Multiple Choice)

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Question 118

Identify the types of adjusting entries and explain the purpose of each type.

(Essay)

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Question 119

Recording expenses early overstates current-period income; recording expenses late understates current period income.

(True/False)

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Question 120

Showing 101 - 120 of 212

On December 31, Winters Company's Prepaid Rent account had a balance before adjustment of $6,000. Three months' rent was paid in advance on December 1, the first day of the lease term. The adjusting entry needed on December 31 is:

The accrual basis of accounting reflects the principle that revenue is recorded when it is earned, not when cash is received.

What is an adjusted trial balance? Why is it prepared?

The main purpose of adjusting entries is to:

It is acceptable to record prepayment of expenses as debits to expense accounts if an adjusting entry is made at the end of the period to bring the asset account balance to the correct unused or unexpired amount.

On July 1 Plum Co. paid $7,500 cash for management services to be performed over a two-year period. Plum follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. On July 1 Plum should record:

The accrual basis of accounting:

If accrued salaries were recorded on December 31 with a debit to Salaries Expense and a credit to Salaries Payable, and no reversing entries were made on January 1, the entry to record payment of these wages on the following January 5 would include:

Profit margin is calculated by dividing net sales by net income.

Accrued expenses at the end of one accounting period are expected to result in cash payments in a future period.

The periodic expense created by allocating the cost of plant and equipment to the periods in which they are used, representing the expense of using the assets, is called:

Accumulated depreciation is shown on the balance sheet as a subtraction from the cost of its related asset.

Explain the purpose of adjusting entries at the end of a period and provide an example of an adjusting entry.

Accrued revenues:

Asset and liability balances are transferred from the adjusted trial balance to the balance sheet.

Identify the types of adjusting entries and explain the purpose of each type.

Recording expenses early overstates current-period income; recording expenses late understates current period income.

Accounting in Business

Analyzing and Recording Transactions

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resoures, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

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