Exam 3: The Adjusting Process

For each of the following statements, indicate whether it applies to: the cash basis of accounting (cash basis) the accrual basis of accounting (accrual basis) both the cash and accrual basis of accounting (both) neither the cash nor the accrual basis of accounting (neither). Your response should be cash basis, accrual basis, both, or neither. Statement Applies to An easier method of accounting to follow Provides a better picture of a business's revenues and expenses Small businesses may use this method

Accrued revenue represents the receipt of cash before the revenue has been earned.

The depreciation method that allocates an equal amount of depreciation to each year is called the straight-line method.

The entry to record depreciation includes a debit to the ________ account.

The cash basis of accounting ignores ________.

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

The asset account, Office Supplies had a beginning balance of $5,300. During the accounting period, office supplies were purchased, on account, for $5,500. A physical count, on the last day of the accounting period, shows $2,800 of office supplies on hand. What is the amount of Supplies Expense for the accounting period?

Jones Financial Services, Inc. performed accounting services for a client in December. A bill was mailed to the client on December 30. The company received the client's check by mail on January 5. Which of the following accounts should appear on the income statement for the year ended December 31 as related to the services performed?

Adjusting entries are completed to ensure that all income statement accounts for the accounting period examined have been recorded and to update the balance sheet accounts.

Adjusting entries either credit a revenue account or debit an expense account.

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

The employees of Sinclair Services, Inc. worked the last two weeks of December. They received their paychecks on January 2. Which of the following accounts should appear on the balance sheet as of December 31?

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

West Electrical, Inc. performed services of $8,000 on January 24 and invoiced the customer. West received the $8,000 on January 31. Provide the journal entry on January 31 when the cash was received. (Ignore explanation.)

On December 31, 2019, $2,500 of salaries have been earned but not yet paid to employees. If the business failed to make an adjusting entry on December 31, 2019, indicate the effect on assets, liabilities, equity, and net income. Understated, Overstated, No Effect Assets Liabilities Equity Net Income

The key differences between the cash basis and accrual basis of accounting can be explained by understanding the time period concept and the revenue recognition and matching principles.

Deferred expenses are also called prepaid expenses.

Janno Enterprises prepaid four months of office rent totaling $9,000 on October 1, 2019. The rent period begins on October 1. Assuming Janno records deferred expenses using the alternative treatment, what would be the adjusting entry recorded on December 31, 2019?

The revenue recognition principle guides accountants in ________.

Murphy, Inc. prepaid $9,600 on October 1, 2018 for a one-year insurance premium. Coverage begins October 1. On January 1, 2019 (after December 31 adjustments), the Prepaid Insurance account will have a debit balance of ________. (Round any intermediate calculations to two decimal places, and your final answer to the nearest whole number.)