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.

For each of the following, journalize the necessary adjusting entry:

Which of the following is not true regarding depreciation?

Vertical analysis is useful for analyzing financial statement changes over time.

As time passes, fixed assets other than land lose their capacity to provide useful services. To account for this decrease in usefulness, the cost of fixed assets is systematically allocated to expense through a process called

The difference between deferred revenue and accrued revenue is that accrued revenue has been recorded and needs adjusting and deferred revenue has never been recorded.

Income statements for Debra's Design Services are shown below. (a) Prepare a vertical analysis of Debra's Design Services income statements. (b) Does the analysis indicate favorable or unfavorable trend(s)? (c) What other information would enhance the analysis?

If the effect of the debit portion of an adjusting entry is to increase the balance of an expense account, which of the following describes the effect of the credit portion of the entry?

The revenue recognition concept states that revenue should be recorded in the same period as the cash is received.

How will the following adjusting journal entry affect the accounting equation?

DogMart Company records depreciation to Office Equipment and Production Equipment. Depreciation for the period ending December 31 is $1,400 for Office Equipment and $2,650 for Production Equipment. Prepare two entries to record the Office Equipment and Production Equipment depreciation.

Accruals are needed when an unrecorded expense has been incurred or an unrecorded revenue has been earned.

The Accumulated Depreciation's account balance is the sum of the depreciation expense recorded in past periods.

What effect will this adjustment have on the accounting records?

The financial statements measure precisely the financial condition and results of operations of a business.

Requirement: Make the journal entries for both of the following:

If the adjustment of the unearned rent account at the end of the period to recognize the amount of rent earned is inadvertently omitted, the net income for the period will be understated.

Generally accepted accounting principles requires that companies use the ____ of accounting.

The following adjusting journal entry does not include an explanation. Select the best explanation for the entry.

At the end of the fiscal year, the usual adjusting entry for accrued salaries owed to employees was omitted. Which of the following statements is true?