Exam 3: The Adjusting Process

Adjusting entries are needed to correctly measure the ________.

The time period concept assumes that the activities of a business can be sliced into small time segments and that financial statements can be prepared for specific periods of time.

To fill in the unadjusted trial balance columns in a worksheet,the account balances before adjustments are copied directly from the ________.

On September 28,2018,Benson Consulting signs a contract with Commercial Cleaning Services.Commercial Cleaning will provide 6 months of office cleaning services for $2,000 per month.Benson Consulting pays $12,000 cash to Commercial Cleaning on September 28,2018.Cleaning services will begin on October 1,2018.Complete the following requirements for Benson Consulting. (1)Prepare the journal entries for September 28,2018 and December 31,2018 (the end of Benson's fiscal year).Make proper journal entries (omit explanations).Deferred expenses are treated initially as assets. (2)If Benson fails to record the December 31,2018 adjusting entry,what is the effect on net income,income statement account(s)and balance sheet account(s)? (3)Why is it important for companies to record adjusting entries?

The time period concept assumes that the activities of a business can be sliced into small time segments.

On November 27,2018,Metro Delivery Service Company signs a contract with Brooklyn Financial Services Company.Metro Delivery Service will provide 3 months of local delivery services for $5,000 per month.Brooklyn pays $15,000 cash to Metro on November 27,2018.Delivery services will begin on December 1,2018.Complete the following requirements for Metro Delivery Services. (1)Prepare the journal entries for November 27,2018 and December 31,2018 (the end of Metro's fiscal year).Make proper journal entries (omit explanations).Deferred revenues are treated initially as liabilities. (2)If Metro fails to record the December 31,2018 adjusting entry,what is the effect on net income,income statement account(s)and balance sheet account(s)? (3)Why is it important for companies to record adjusting entries?

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

On the first day of January,Builders Company borrowed $1,000 on a one-year note payable bearing interest at 3% per year.The note specifies that principal and interest must be paid in full at the end of the one-year period.On June 30,the adjusted trial balance will show Interest Payable of ________.

Which of the following is NOT a type of adjusting entry?

On January 1,2018,the Prepaid Insurance account of Dogwood Company had a beginning balance of $1,500.Three months of insurance premiums remain in this beginning balance.On February 21,2018,the company paid an annual insurance premium in the amount of $3,400 for the period beginning March 1.On February 28,2018,the balance in Prepaid Insurance is $1,000.

Laramie Company signed a contract with a service provider for security services at a rate of $350 per month for the period of January through June.Laramie Company will pay the service provider the entire amount at the end of June.Laramie Company makes adjusting entries each month.During the month of June,it should record total security expense of $700.

On March 1,2018,LeClaire Company paid $60,000 for office rent covering the three-month period ending May 31,2018.Journalize the adjusting entry on March 31 by using the alternative treatment of deferred expenses.Omit explanation.

The Pediatric Dental Company prepays the rent on its dental office.On July 1,the company paid $18,000 for 6 months of rent.The rent period begins on July 1.How much Rent Expense should the company record for the three months ended September 30 under the cash basis? Why?

A company received $5,000 for 100 one-year subscriptions on July 1.The journal entry to record this cash receipt would include a ________.The company uses a liability account for revenue received in advance.

Justice Company purchased a machine for $15,000 two 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.

ABC Tax Planning Service started business in January 2018.The company rented an office for $1,800 per month starting from January 1,2018.On that day,ABC prepaid the rent through June 30.The company makes adjusting entries at the end of each month.What is the balance in the Prepaid Rent account as of April 30,2018?

On January 1,Nash Company had $1,000 of supplies on hand.During January,Nash purchased $5,500 worth of new supplies.At the end of the month,a count revealed $700 worth of supplies remaining on the shelves.The adjusting entry needed will include a debit to Supplies Expense of $5,800.The supplies were initially recorded as an asset.

If a company fails to make an adjusting entry to record accrued expenses,the liabilities and net income will be overstated.

A performance obligation is a contractual promise with a customer to transfer a distinct good or service.

On March 1,2016,Nortons Company 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.Omit explanation.