Exam 3: The Adjusting Process

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:

To match expenses against revenues means to:

Which of the following entries would be recorded if a company uses the cash basis method of accounting?

Ursula Tax Planning Service has the following plant assets: Communications equipment: Cost, $6,720 with useful life of 8 years; Furniture: Cost, $18,000 with useful life of 12 years; and Computer: Cost, $12,000 with useful life of 4 years. Ursula's monthly depreciation expense calculated using the straight-line method is: (Assume salvage value of all the assets to be zero)

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.

If an adjusting entry includes a debit to Rent Expense, that would indicate that the payment of rent had been previously recorded as a(n):

The following extract was taken from the worksheet of Dutch Inc. for the year 2014. From the above information, determine the amount of the Rent Expense adjustment.

The following extract was taken from the worksheet of Kelly Bakers for the year 2014. For the above information, determine the amount of Depreciation Expense for the equipment used in the business.

When does a company account for earned revenue if it follows cash basis accounting?

Revenue is said to be earned when the business has:

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?

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 October 1, she paid $3,600 for insurance for a one-year period. At the end of the year, she will make an adjustment entry that debits Insurance Expense for $900.

Two weeks earlier, a business had rendered services to one of its customers on account for which the payment was received today. Which of the following entries would be recorded if the company uses accrual basis accounting?

Henry Tax Planning Service bought computer equipment for $24,000 on January 1, 2014. It has an estimated useful life of 4 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. Calculate the amount of Depreciation Expense for the period, January 1, 2014 through September 30, 2014, for this equipment.

Which of the following accounting terms assumes that a business's activities can be divided into small segments and financial statements can be prepared for specific periods, such as a month, quarter, or year?

If a company fails to make an adjusting entry for accrued revenues, the net income will be overstated.

Which of the following accounting elements does the matching principle help to match?

Deborah Consultants had the following balances before passing adjusting entries in the books on December 31, 2015. Cash \ 5,000 Deborah, Withdrawals Accounts Receivable 2,000 Service Revenue 10,600 Office Supplies 1,800 Salaries Expense 4,000 Equipment 15,000 Rent Expense B00 Accumulated Depreciation - Depreciation Expense- Equipment 9,000 Equipment 1,500 Beborah, Capital 15,000 Supplies Expense 500 Prepare the adjusted trial balance after considering these adjustments: a. Office Supplies used, $800. Assume the office supplies were initially recorded as an asset. b. Accrued salaries on December 31, $600. c. Revenue accrued but not recorded, $200.

On January 1, Smith had $2,000 of supplies on hand. During January, Smith purchased $4,000 worth of new supplies. At the end of the month, a count revealed $1,000 worth of supplies remaining on the shelves. The adjustment entry needed will include a debit to Supplies Expense of $5,000. The supplies were initially recorded as an asset.

In accounting terms, the calendar year is always called the fiscal year.