Exam 3: The Adjusting Process

In the case of a prepaid expense,the adjusting entry required at the end of a period consists of a debit to Prepaid expense.

Entries that record cash collected before the revenues are earned are:

On the first day of January,Patricia borrowed $5000 on a one-year loan payable bearing interest at 7% per year.The loan specifies that principal and interest must be paid in full at the end of the one-year period.On 30 June,the adjusted trial balance will show Interest payable of:

Ursula Tax Planning Service has the following plant assets: Communications equipment: Cost,$3840 with useful life of 8 years; Furniture: Cost,$17,280 with useful life of 12 years; and Computer: Cost,$13,440 with useful life of 4 years.Assume the salvage value of all the assets is zero and the straight-line method is used. Ursula's monthly depreciation journal entry will include a:

Smith Technical Services is working on a six-month job for a client,starting on 1 February.They will collect $20,000 from their customer when the job is finished.On 1 March,their Accounts receivable account had a debit balance of $4000.At the end of March,after monthly adjusting entries have been made,what will be the balance in Accounts receivable?

Understating expenses occurs by:

How do the adjusting entries differ from other journal entries?

The accounting records of Patricia Event Planning Service include the following select unadjusted balances on 31 December 2016: Salaries expense,$6,000; Service revenue: $20,000; Unearned revenue,$400; Supplies expense,$600; Rent expense,$300; Depreciation expense-equipment,$200. Later in December,she worked with a new client and provided event planning services for an upcoming event.When the event is complete in January 2017,she will collect the full amount of $2400 from her client.As of the end of December 2017,she rendered one-third of the services covered by the contract.She made the accrual adjustments.The final adjusted balance of Service revenue,as shown on the adjusted trial balance,should be a:

Healthy Living,a diet magazine,collected $492,000 in subscription revenue on 31 May.Healthy Living earns a minimum of $369,000 from the buyers who are not the subscribers.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.What is the balance in the Unearned revenue account on 31 December?

The end-of-period process starts with the:

ABC Company signed a one-year $48,000 loan payable at 8% interest on 1 May 2017.If ABC only adjusts their accounts once a year at year-end,how much interest expense was accrued on 31 December 2017?

ABC Company signed a one-year $24,000 loan payable at 8% interest on 1 May 2016.How much interest expense must be accrued on 31 May 2016?

Smith borrowed $24 000 on a one-year Loan payable with an interest rate of 10% per year on 1 June.He will repay the principal and interest at the end of the one-year period.Smith makes accrual adjustments at the end of each month.He should record interest expense of $2 400 on 30 June.

Viva Ltd had bought machine X for $15,900 2 years ago.The machine had no residual value and had an estimated useful life of 10 years.If the company uses the straight-line depreciation method,calculate the current book value of the machine.

All of a company's accounts and their balances appear on the:

On 1 January,Smith had $2 500 of supplies on hand.During January,Smith purchased $6 000 worth of new supplies.At the end of the month,a count revealed $800 worth of supplies remaining on the shelves.The adjustment entry needed will include a debit to Supplies expense of $7 700.The supplies were initially recorded as an asset.

A contra account has two characteristics: (1)a contra account is paired with its related account and (2)a contra account's normal balance is the same as that of the related account.

Which of the following accounts would be used under the accrual method of accounting,but NOT under the cash-basis method of accounting?

In the case of Unearned revenue,the adjusting entry at the end of the period includes a credit to Service revenue.

Healthy Living,a diet magazine,collected $1,440,000 in subscription revenue on 31 May.Healthy Living earns a minimum of $1,080,000 from the buyers who are not the subscribers.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.By the end of December,what is the amount of Subscription revenue that has been earned?