Exam 3: The Adjusting Process

On December 15,Duncan Services,Inc.collected revenue of $3,000 in advance from a new client,and agreed to provide services to the client for the period of December 15 through January 15 of the following year.Assume that the company records deferred revenues using the alternative treatment,and journalize the adjusting entry recorded on December 31.

Qwerty,Inc.prepaid $7,200 on November 1,2014 for a one-year insurance premium.On January 1,2015 of the next year (after December 31 adjustments),the Prepaid Insurance account will have a debit balance of ________.

Deborah Consultants had the following accounts and account balances after adjusting entries.Assume all accounts have normal balances.Calculate the amount of service revenue and prepare the adjusted trial balance for Deborah Consultants as of December 31,2017. Cash \ 6,000 Dividends \ 3,000 Accounts Receivable 2,000 Service Revenue ? Office Supplies 1,800 Salaries Expense 4,000 Equipment 15,000 Rent Expense 800 Accumulated Depreciation - 9,000 Depreciation Expense - 1,500 Equipment Equipment Common Stock 15,000 Supplies Expense 500

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

Downs Tax Planning Service bought communications equipment for $9,600 on January 1,2017.It has an estimated useful life of five years and zero residual value.Downs uses the straight-line method to calculate depreciation and records depreciation expense in the books at the end of every month.As of June 30,2017,the balance in the Accumulated Depreciation account for this equipment is ________.

On December 31,2016,interest of $1,500 has accrued on a bank note.This interest payment is due on January 20,2017.If no adjusting entry is made on December 31,2016,indicate the effect on assets,liabilities,equity,and net income. Understated, Overstated, No Effect Assets Liabilities Equity Net Income

Deferred expenses are also called prepaid expenses.

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

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

A company receives payment from one of its customers on August 5 for services performed on July 21.Which of the following entries would be recorded if the company uses accrual basis accounting?

The Brighton Dental Corporation prepays the rent on its dental office.On July 1,the corporation paid $18,000 for 6 months of rent.How much Rent Expense should Brighton Dental Corporation record the three months ended September 30 under the accrual basis? Why?

In cash basis accounting,revenue is recorded when cash is received,and expenses are recorded when they are paid.

Which of the following entries would be made as the result of the revenue recognition principle?

The accounting principle that ensures all expenses are recorded during the period when they are incurred and offsets those expenses against the revenues of the period is called the ________ principle.

In the case of deferred revenue,the adjusting entry at the end of the period includes a debit to Service Revenue.Assume the deferred revenue is initially recorded as a liability.

At Sea,a cruise industry 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 basis of accounting.Provide the adjusting entry needed on June 30.(Ignore explanation).Assume the magazine initially records a liability for the subscription revenue.

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

Which of the following assumes that financial statements of a business can be prepared for specific periods?

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

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