Exam 3: The Adjusting Process

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

Revenue is earned when ________.

The accrual method is an easier accounting method to follow than cash basis accounting because it generally requires less knowledge of accounting concepts and principles.

Dickens Services Company performed accounting services for a client in December.A bill was mailed to the client on December 30.The company received a check by mail on January 5.Which of the following accounts should appear on the balance sheet as of December 31 as related to the services performed?

Mason Painting Services has a weekly payroll of $27,000.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 $810,000 at December 31.What amount should be debited to Salaries Expense on December 31?

The accountant of Peyton Financial Services failed to make an adjusting entry to record $7,000 of depreciation expense.Which of the following statements is TRUE?

The accountant of Reliable Consulting Company 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?

If an adjusting entry includes a debit to Rent Expense,it indicates that the payment of rent had been previously recorded as a(n)________.

Wellness,a healthy living magazine,collected $516,000 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?

Adjusting entries do not update balance sheet accounts.

Which of the following is a contra account?

The Accumulated Depreciation account is ________.

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

Advance cash payments of future expenses are called ________.

Under cash basis accounting,an expense is recorded only when cash is paid.

Accrual basis accounting requires the business to review the unadjusted trial balance and determine whether any additional revenues and expenses need to be recorded.

Luminous Electrical Company 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. )

If a company fails to make an adjusting entry for accrued revenues,the net income will be overstated.

On September 1,Advantage Maintenance Company contracted to provide monthly maintenance services for the next ten months at a rate of $2,400 per month.The client paid Advantage $24,000 on September 1.The maintenance services began on that date.Assuming Advantage records deferred revenues using the alternative treatment,what would be the adjusting entry recorded on December 31?

Prepaid Insurance is an asset account that appears on the balance sheet.