Exam 3: The Adjusting Process

To match expenses against revenues means to:

The accountant of 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 statements is true?

An adjusting entry is completed:

Which of the following accounts does cash basis accounting ignore?

On December 15, Duncan collected revenue of $3,000 in advance from a new client, and agreed to provide services to the client for the period of December 15 through January 15 of the following year. Assuming Duncan records unearned revenues using the alternative treatment, journalize the adjusting entry recorded on December 31.

The matching principle is also called:

What is the term used for the difference between the Equipment account and the Accumulated Depreciation account?

An adjusting entry that debits Accounts Receivable is an example of a(n):

The revenue recognition principle guides accountants in:

Smith signed a contract with a service provider for security services at a rate of $250 per month for the period of January through June. He will pay the service provider the entire amount at the end of June. Smith makes adjusting entries each month. During the month of June, Smith should have recorded total security expense of $500.

Unearned Revenue is a ________ account and carries a ________ normal balance.

The sum of all the depreciation expense recorded to date for a depreciable asset is called:

ABC Company signed a one-year $12,000 note payable at 8% interest on May 1, 2012. How much interest expense must be accrued on May 31, 2012?

Unearned Revenue is classified as a(n)________ account.

Robert Rogers, CPA, owns a computer that is used in his consultancy services. As per the matching principle, the related account that should appear on the income statement for the year ended December 31, 2014 is:

On July 1, Alpha Company paid rent of $15,000 for a small equipment storage area for the period of July 1 till December 31. Provide the adjusting journal entry on July 31. Assume the prepaid expense is initially recorded as an asset.

Patricia Event Planning Service collects fees from their customers in advance. On January 1, 2015, the balance of her Unearned Revenue account had a balance of $6,000 (Cr.). During January and February, she collected $3,000 and $1,000 as advance fees. During the two-month period, she rendered services of $6,500. What is the balance in Unearned Revenue at the end of February?

Which of the following 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 accounting?

If a company fails to make an adjusting entry for prepaid expense, the assets will be overstated. Assume the prepaid expense is initially recorded as an asset.

Patricia Event Planning Service records prepaid expenses and unearned revenues using the alternative treatments. Patricia makes adjusting entries as needed to bring her books to the full accrual basis once a year at the end of the year. On December 15, she collected $1,000 from a customer in advance for a series of events that will start late December and end in March. At the end of the year, she rendered approximately 10% of the services for her customer. The adjusting entry on December 31 will include a debit to Service Revenue for $900.