Exam 3: The Adjusting Process

The liability created when a business collects cash from its customers before completing a service or delivering a product is called ________.

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

A depreciable asset's cost minus accumulated depreciation is called ________.

Kostner 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?

Wentlent Services,Inc.records deferred expenses as expenses when payment is made in advance and deferred revenues as revenues when the payment is received in advance.At the end of the year,Wentlent Services,Inc.makes the necessary adjustments based on accrual basis accounting.On July 1,it paid rent for an office in the amount of $24,000 for the period July 1 through June 30 of the following year.Provide the year-end adjusting entry for rent prepayment.

The following extract was taken from the worksheet of Dutch,Inc.for the year 2016. Dutch, Inc. Worksheet December 31, 2016 From the above information,determine the amount of the Rent Expense adjustment.

Mason Painting Services has a weekly payroll of $24,000.December 31 falls on Wednesday and Mason will pay its employees the following Monday (January 5)for the previous full week.Assume that Mason has a five-day workweek and has an unadjusted balance in Salaries Expense of $770,000.What amount should be debited to Salaries Expense on December 31?

On July 1,Omega,Inc.paid rent of $15,000 for a small equipment storage area from July 1 until December 31.Provide the adjusting journal entry on July 31.(Ignore explanation).Assume the deferred expense is initially recorded as an asset.

Avalon Event Planning Services,Inc.records deferred expenses and deferred revenues using the alternative treatments.It makes adjusting entries as needed to bring its books to the full accrual basis once a year at the end of the year.On October 1,it paid $3,600 for insurance for a one-year period.At the end of the year,it will make an adjusting entry that debits Insurance Expense for $1,200.

What is the difference between cash basis accounting and accrual basis accounting?

Get in Shape,a healthy living magazine,collected $528,000 in subscription revenue on May 31.Each subscriber will receive an issue of the magazine in each of the next 12 months,beginning with the June issue.The company uses the accrual method of accounting.What is the balance in the Unearned Revenue account as of December 31?

On March 1,2016,LeBlanc,Inc.paid $60,000 for office rent covering the three-month period ending May 31,2016.Journalize the adjusting entry on March 31 by using the alternative treatment of deferred expenses.

The accountant for Hobson Electrical Repair,Inc.failed to make an adjusting entry to record $5,000 of unpaid salaries for the last two weeks of the year.Which of the following statements is true?

The worksheet is NOT a journal,a ledger,or a financial statement.

On October 1,2016,Smith Service Company paid $5,000 in rent for the next five months,beginning with October 2016.On that date,Smith debited Prepaid Rent and credited Cash.If Smith fails to make an adjusting entry on December 31,2016,indicate the effect on assets,liabilities,equity,and net income. Understated, Overstated, No Effect Assets Liabilities Equity Net Income

Which of the following is the correct formula for calculating depreciation under the straight-line method?

On September 1,Capitol Maintenance Company contracted to provide monthly maintenance services for the next nine months at a rate of $2,400 per month.The client paid Capitol $21,600 on September 1.The maintenance services began on that date.Assuming Capitol records deferred revenues using the alternative treatment,what would be the adjusting entry recorded on December 31?

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?

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

A worksheet is an external document that forms a part of the financial statements.