Exam 3: The Adjusting Process

At year-end,the balance in the prepaid insurance account,prior to any adjustments,is $6,000.The amount of the journal entry required to record insurance expense will be $4,000 if the amount of unexpired insurance applicable to future periods is $2,000.

Even though GAAP requires the accrual basis of accounting,some businesses prefer using the cash basis of accounting.

Gizmo Company purchased a one-year insurance policy on October 1 for $1,800.The adjusting entry on December 31 would be:​

Accrued expenses affect ________ on the balance sheet.

Match the type of account (a through e) with the business transactions that follow. -Paid six months of rental payments to the landlord.

A company pays $36,000 for 12 months' rent on October 1,recording the prepayment as an asset.The adjusting entry on December 31 is a debit to Rent Expense of $9,000,and a credit to Prepaid Rent of $9,000.

An adjusting entry to accrue an incurred expense will affect total liabilities.

The revenue recognition principle

Listed below are accounts to use for transactions (a)through (j),each identified by a number.Following this list are the transactions.You are to indicate for each transaction the accounts that should be debited and credited by placing the account number (s)in the appropriate box.​ ​

Under the accrual basis,some accounts in the ledger require updating at the end of the period.Discuss the three main reasons for this updating and give an example of each.

What effect will this adjusting journal entry have on the accounting records?

Adjusting entries always include

The difference between the balance of a fixed asset account and the related accumulated depreciation account is termed

Match the type of account (a through e) with the business transactions that follow. -Paid for a six-month magazine subscription.

When preparing an income statement vertical analysis,each revenue and expense is expressed as a percent of net income.

Using the following account balances for Garry's Tree Service,prepare a trial balance.​

Classify the following items as: (1)prepaid expense, (2)unearned revenue, (3)accrued expense,or (4)accrued revenue.​a)Fees received but not yet earnedb)Fees earned but not yet receivedc)Paid premium on a one-year insurance policyd)Property tax owed to be paid beginning of next year

Prepare adjusting entries for the following transactions:

Salaries of $6,400 are paid for a five-day week on Friday.Prepare the adjusting journal entry that is required if the month ends on Thursday.

Smokey Company purchases a one-year insurance policy on July 1 for $3,600.The adjusting entry on December 31 is