Exam 3: The Adjusting Process

Modern Artists' Services signed a contract with a maintenance service company to maintain a building that Modern Artists' will use as an office. The contract states that the work will begin on February 1 and end on May 31. Modern Artists' will pay the maintenance service company $8,000 at the end of May. It accrues Maintenance Expense at the end of every month. What is the balance in the Accounts Payable account for amounts owed to the maintenance service company at the end of March?

The accountant of Reliable Consulting, Inc. failed to make an adjusting entry to record $6,000 for unearned service revenues that were earned before the end of the fiscal year. Assume the company initially recorded a liability. Which of the following statements is true?

In applying the revenue recognition principle, which of the following statements regarding multiple performance obligations is incorrect?

At the time the transaction occurred, which of the following would result in an increase in net income under the accrual basis of accounting, but would not result in an increase in net income under cash basis accounting?

The unadjusted trial balance of Albert Business Consulting at December 31, 2018, and the data for the adjustments follow: $\quad$ $\quad$ $\quad$ $\quad$$\text {Albert Business Consulting}$ $\quad$ $\quad$ $\quad$ $\quad$$\text {Unadjusted Trial Balance}$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\text {December 31,2018}$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\text { Balance }$ Account Title Debit Credit Cash \ 22,000 Accounts Receivable 12,000 Prepaid Insurance 7,500 Office Supplies 6,000 Land 18,000 Accounts Payable 15,000 Salaries Payable 5,000 Unearned Revenue 9,000 Common Stock 30,000 Retained Earnings 5,000 6,000 Dividends 24,500 Service Revenue 15,000 Salaries Expense 4,000 Advertising Expense \ 89,500 \ 89,500 Totals Albert is preparing financial statements for the year ending December 31, 2018. Adjustment data at December 31 follows: a. Albert pays its employees each Friday. December 31, 2018 falls on a Monday. The employees will earn $1,250 for the five-day work week. b. On August 31, 2018, Albert agreed to provide consulting services to Smith Company for 6 months, beginning on September 1, 2018, at $1,500 per month. Smith paid $9,000 on August 31, 2018. Albert treats deferred revenues initially as liabilities. c. Albert prepaid 6 months of business insurance on September 30, 2018. The insurance begins on October 1. Albert treats deferred expenses initially as assets. d. On December 31, 2018, Albert received a bill for the November and December advertising in a local newspaper, $800. This bill will be paid on its due date, which is January 10, 2019. e. As of December 31, 2018, Albert had performed services for Alliance Company for $5,000. The invoice will be sent on January 5, 2019 and payment is due on January 15, 2019. Albert received the payment on its due date. Requirement 1. Prepare the adjusting journal entries at December 31, 2018. 2. Prepare the adjusted trial balance at December 31, 2018. Include a proper heading.

The revenue recognition principle requires companies to follow a five-step process. List these five steps.

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

On December 31, 2018 the balance in Energy Exploration Company's Unearned Revenue account was a credit of $10,000. In January, 2019, the company received an advance payment of $11,000 from a new customer for services to be performed. By January 31, adjustments were made to recognize $6,000 of the revenue that had been earned during January. What was the balance in Unearned Revenue on January 31, 2019?

The partial worksheet of Browning Furniture is as follows: Browning Furniture Worksheet December 31,2019 Accumulated Depreciation-Equipment \ 8,700 1,200 Common Stock 15,000 Dividends 3,000 Service Revenue 10,600 3,000 Salaries Expense 4,000 Rent Expense 2,000 Depreciation Expense - 1,200 Equipment Supplies Expense 500 Total \ 34,300 \ 34,300 \ 4,700 700 Calculate and enter the amounts for the Adjusted Trial Balance columns.

Which of the following entries would be made because of the matching principle?

On September 1, Patterson Maintenance Company contracted to provide monthly maintenance services for the next three months at a rate of $2,400 per month. The client paid Patterson $7,200 on September 1. Assuming Patterson records deferred revenues using the alternative treatment, what would be the entry on September 1?

The accounts that are used in a worksheet are taken from and listed in the same order as the ________.

Bayside Technical Services signed a contract on a six-month job for a client, starting on March 1. Bayside will collect $24,000 from its customer when the job is finished but the revenue is earned evenly over the six months. On March 31, before adjusting entries are made, Bayside's Accounts Receivable account had a debit balance of $4,000. After the March 31 monthly adjusting entry has been made, what will be the balance in Accounts Receivable?

The advance cash receipts of future revenues are called ________.

The goal of matching is to compute an accurate net income or net loss for the time period.

On September 1, 2018, Real Estate Professionals, Inc. paid $7,000 in advance for an eight-month rental space covering the period of September 1, 2018 through April 30, 2019. The deferred expense was initially recorded as an asset. The company makes adjusting entries once a year at year-end. The adjusting entry on December 31, 2018 would include a ________.

During December 2018, April Service Company performed $1,500 of services, but as of December 31, 2018, the clients have not yet been billed. If April fails to make an adjusting entry on December 31, 2018, indicate the effect on assets, liabilities, equity, and net income.

On July 1, Delta, Inc. prepaid rent for an equipment storage building. Delta paid $20,000 to rent the building from July 1 through the end of the year. Prepare the journal entry needed on July 1 when the payment is made. (Ignore explanation). Assume the deferred expense is initially recorded as an asset.

An expense that has been incurred but not yet paid is called a(n) ________.

Unearned revenue is recorded when ________.