Exam 3: Adjusting the Accounts

Rent received in advance and credited to a rent revenue account which is still unearned at the end of the period, will require an adjusting entry crediting a liability account for the amount still unearned.

Management usually desires ________ financial statements and the IRS requires all businesses to file _________ tax returns.

An item is considered material if

Depreciation is the process of

The Accumulated Depreciation account is a contra asset account that is reported on the balance sheet.

On January 2, 2022, Superchunk purchased a general liability insurance policy for $2,700 for coverage for the calendar year.The entire $2,700 was charged to Insurance Expense on January 2, 2022.If the firm prepares monthly financial statements, the proper adjusting entry on January 31, 2022, will be:

A flower shop makes a large sale for $1,200 on November 30.The customer is sent a statement on December 5 and a check is received on December 10.The flower shop follows GAAP and applies the revenue recognition principle.When is the $1,200 considered to be recognized?

Elliott Smith is a lawyer who requires that his clients pay him in advance of legal services rendered.Elliott routinely credits Service Revenue when his clients pay him in advance.In June, Elliott collected $15,000 in advance fees and completed 70% of the work related to these fees.What adjusting entry is required by Elliott's firm at the end of June?

Meat Puppets Company purchased equipment for $7,200 on December 1.It is estimated that annual depreciation on the equipment will be $1,800.If financial statements are to be prepared on December 31, the company should make the following adjusting entry:

The book value of a depreciable asset is always equal to its market value because depreciation is a valuation technique.

Which of the statements below is not true?

The balance in the Prepaid Rent account before adjustment at the end of the year is $21,000, which represents three months' rent paid on December 1.The adjusting entry required on December 31 is to

An accumulated depreciation account

The fiscal year of a business is usually determined by

Expenses include losses that are not part of normal operations under

The cost of a depreciable asset less accumulated depreciation reflects the book value of the asset.

Every adjusting entry affects one balance sheet account and one income statement account.

Which statement is correct?

On February 1, Results Income Tax Service received a $3,000 cash retainer for tax preparation services to be rendered equally over the next four months.The full amount was credited to the liability account Unearned Service Revenue.Assuming that the revenue is recognized equally over the four-month period, what balance would be reported on the February 28 balance sheet for Unearned Service Revenue?

Which of the following is not a common time period chosen by businesses as their accounting period?