Exam 3: The Adjusting Process

In the case of unearned revenue, the cash is received first, and the revenue is earned later.

In accounting, depreciation refers to the:

In the case of a prepaid expense, the adjusting entry required at the end of a period will consist of a debit to the Prepaid Expense account. Assume the prepaid expense was initially recorded as an asset.

Henry Tax Planning Service bought communications equipment for $9,600 on January 1, 2015. It has an estimated useful life of 5 years and zero residual value. Henry uses the straight-line method to calculate depreciation and records depreciation expense in the books at the end of every month. As of June 30, 2015, the balance in the Accumulated Depreciation account for this equipment is:

To fill the unadjusted trial balance columns in a worksheet, the account balances before adjustments are copied directly from the:

Argyle Designs has entered into a contract to design 20 new dresses for a customer. It will collect a total of $40,000 after the design services are complete. Argyle started design work on June 1. As of June 30, Argyle finished 4 of the 20 designs. Argyle will make an adjusting entry at the end of June to accrue $10,000 of service revenue.

Education for All sells tickets in advance for their weekly productions and records the proceeds as Unearned Revenue. At the end of each month, Education for All makes an adjusting entry to account for the tickets used during the month (ticket revenue.)On March 1, the Unearned Revenue account had a credit balance of $4,000. During March, they sold 300 tickets at $20 each and 250 tickets were used during the month. What is the balance in Unearned Revenue at the end of March?

Real Weight Losers, a diet magazine, collected $480,000 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. Provide the adjusting entry needed on June 30. Assume the magazine initially records a liability for the subscription revenue.

Prepaid insurance is an asset account, and hence it appears on the balance sheet.

The account names in a worksheet are taken from and listed in the same order as the:

Prepaid rent is an expense account, and hence it appears on the income statement.

In the case of unearned revenue, the adjusting entry at the end of the period includes a credit to Service Revenue. Assume the unearned revenue is initially recorded as a liability.

On January 1, 2014, Smith had a beginning balance in Prepaid Insurance Expense of $1,200. On February 1, 2014, Smith paid an annual insurance premium in the amount of $4,800. On February 28, 2014, the balance in Prepaid Insurance is $2,000. The prepaid expense was initially recorded as an asset.

On July 1, Alpha Company prepaid rent for a small equipment storage area. They paid $20,000 to rent the area for the period of July 1 through the end of the year. Provide the journal entry needed on July 1 when the payment is made. Assume the prepaid expense is initially recorded as an asset.

Smith borrowed $21,000 on a one year Note payable with an interest rate of 10% per year on June 1. He will repay the principal and interest at the end of the one-year period. Smith makes accrual adjustments at the end of each month. He should record interest expense of $2,100 on June 30.

The following information is available for Able Company's Office Supplies account. From the above information, calculate the amount of office supplies purchased.

A business acquired equipment for $150,000 on January 1, 2015. The equipment will be depreciated over five years of its useful life using the straight-line depreciation method. The business records depreciation once a year on December 31. Which of the following is the adjusting entry required to record depreciation on equipment for the year 2015? (Assume the salvage value of the acquired equipment to be zero.)

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

Healthy Living, a diet magazine, collected $480,000 in subscription revenue on May 31st. Healthy Living earns a minimum of $351,000 from the buyers who are not the subscribers. 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, what is the amount of Subscription Revenue that has been earned?

The accountant for Noble Jewelry Repair Services forgot to make an adjusting entry for Depreciation Expense for the current year. Which of the following is an effect of this error?