Exam 3: Adjusting Accounts and Preparing Financial Statements

The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called:

In accrual accounting, accrued revenues are recorded as liabilities.

On March 31, Phoenix, Inc. paid Melanie Publishing Company $15,480 for a 3-year subscription for five different magazines. The subscriptions started immediately. What is the adjusting entry that should be recorded by Melanie Publishing Company on December 31 of the first year if the credit to record the collection was made to Unearned Fees?

__________________ expenses are those costs that are incurred in a period but are both unpaid and unrecorded.

The cash basis of accounting recognizes revenues when cash payments from customers are received.

The following two separate situations require adjusting journal entries to prepare financial statements as of the fiscal year ended April 30. For each situation, present both the April 30 adjusting entry and the subsequent entry during May to record the payment of the accrued expenses or receipt of the accrued revenue.

Under the accrual basis of accounting, adjustments are often made for prepaid expenses and unearned revenues.

On January 1, Southwest College received $1,200,000 in Unearned Tuition Revenue from its students for the spring semester, which spans four months beginning on January 2. What amount of tuition revenue should the college recognize on January 31?

On March 31, Phoenix, Inc. paid Melanie Publishing Company $15,480 for a 3-year subscription for five different magazines. The subscriptions started immediately. What is the amount of revenue that should be recorded by Melanie Publishing Company for each year of the subscription assuming Melanie uses a calendar reporting period?

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

Financial statements are typically prepared in the following order:

A company pays each of its two office employees each Friday at the rate of $100 per day for a five-day week that begins on Monday. If the monthly accounting period ends on Tuesday and the employees worked on both Monday and Tuesday, the month-end adjusting entry to record the salaries earned but unpaid is:

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

The matching principle requires that expenses get recorded in the same accounting period as the revenues that are earned as a result of the expenses, not when cash is paid.

If a company reporting on a calendar year basis, paid $18,000 cash on January 1 for one year of rent in advance and adjusting entries are made at the end of each month, the balance of Prepaid Rent as of December 1 should be $1,500.

Using the table below, indicate the impact of the following errors made during the adjusting entry process. Use a "+" for overstatements, a "-" for understatements, and a "0" for no effect. The first one is provided as an example

The main purpose of adjusting entries is to:

Discuss how accrual accounting enhances the usefulness of financial statements.

Assuming prepaid expenses are originally recorded in balance sheet accounts, the adjusting entry to record use of a prepaid expense is:

Adjusting is a three-step process (1) ____________________________, (2) __________________________, and (3) ____________________________.