Exam 3: The Adjusting Process

Robert Rogers, CPA, performed accounting services for a client in December. A bill was mailed to the client on December 30. Roberts received a check by mail on January 5. As per the revenue recognition principle, the related account that should appear on the balance sheet as of December 31 is:

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.

If a company is using the accrual basis accounting method, when should it record its earned revenue?

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

The advance cash payments of future expenses are called:

An adjusted trial balance does not list the revenues and expenses of a business.

What type of account is Prepaid Rent and what is its normal balance?

The salaries are $6,000 per week of 5 working days and are paid weekly at the end of Fridays. The end of the month falls on a Thursday. Patricia made the appropriate accrual adjustment and posted it to the ledger. The final adjusted balance of Salaries Payable, as shown on the adjusted trial balance, will be a: (Assume that there was no beginning balance in the Salaries Payable account.)

Revenue that has been earned but not yet collected in cash is called a(n):

An internal document that helps summarize data for the preparation of financial statements is called a:

GAAP requires a public company to prepare a worksheet for financial reporting purposes.

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.