Exam 3: Adjusting Accounts for Financial Statements

The cash basis of accounting is an accounting system in which revenues are reported in the income statement when cash is received and expenses are reported when cash is paid.

On January 8,Gallery Corp.records $5,000 of accrued salaries.On January 15,$10,000 of salaries are paid.The entry on January 15 includes a debit to the Salaries Payable account.

Describe the types of entries required in later periods that result from accruals.

Laurey's Pet Emporium purchased equipment on January 1 for $35,000.The equipment will be used for five years,after which the estimated residual value will be $2,000.Using straight-line depreciation,what is the depreciation expense for the first year of the asset's life?

To correct the error in debiting a truck purchase to Trucking Expense.

A balance sheet that places the liabilities and equity to the right of the assets is called a(n):

During the year ended December 31,2015,clients paid fees in advance for accounting services amounting to $45,000.These fees were recorded in an account called Unearned Accounting Fees.If $30,000 of these fees are still unearned on December 31,2015,what is the required December 31 adjusting entry?

Under the alternative method for recording prepaid expenses,the purchase of insurance for cash would be recorded as a debit to Cash and a credit to Prepaid Insurance.

An adjusting entry was made on December 31,2015,to accrue salaries expense of $1,200.Which of the following entries would be prepared to record the next payment of salaries,on January 5,2016,in the amount of $3,000?

Accrued revenues:

If the accountant failed to make the end-of-period adjustment to reduce the Unearned Management Fees account by the amount of management fees earned,the omission would cause:

The account format of the balance sheet matches the accounting equation.Assets are on the left side of the statement.Liabilities and equity are on the right side of the statement.

Both the accrual basis and the cash basis of accounting increase the comparability of financial statement information from period to period.

An adjusting entry can only affect income statement accounts.

The report format is considered to be the only correct format for the balance sheet.

A trial balance prepared after adjustments have been recorded is called a(n):

If equipment were purchased from an outside party,the using up of the equipment's economic benefit would be considered an external transaction.

The accrual basis of accounting is an accounting system in which revenues are reported as earned when cash is received.

Adjusting entries are made after the preparation of financial statements.

The following journal entry (incorrectly)recorded the purchase of office supplies for $1,200 on credit: If only one entry is to be made to correct this entry it would be: