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Exam 3: The Adjusting Process

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Question 51

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Which of the following is an example of accrued revenue?

A) snow removal services that have been paid for three months in advance
B) snow removal services that have been provided but have not been billed or paid
C) an agreement that has been signed for snow removal services for the next three months
D) snow removal services that have been provided and paid on the same day

E) B) and D)
F) B) and C)

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Question 52

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

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Question 53

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

Adjusting entries affect balance sheet accounts to the exclusion of income statement accounts.

Adjustments for accruals are needed to record a revenue that has been earned or an expense that has been incurred but not recorded.

A company receives $6,500 for two season tickets sold on September 1.If $2,500 is earned by December 31,the adjusting entry made at that time is a debit to Cash,$2,500,and a credit to Ticket Revenue,$2,500.

The accounting principle upon which deferrals and accruals are based is

A business pays biweekly salaries of $20,000 every other Friday for a ten-day period ending on that day.The last payday of December is Friday,December 27.Assume the next pay period begins on Monday,December 30 and the proper adjusting entry is journalized at the end of the fiscal period (December 31).Journalize the entry for the payment of the payroll on Friday,January 10.

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

For the year ending December 31,Orion,Inc.mistakenly omitted adjusting entries for $1,500 of supplies that were used,(2) unearned revenue of $4,200 that was earned,and (3) insurance of $5,000 that expired.For the year ending December 31,what is the effect of these errors on revenues,expenses,and net income?

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

Which of the following is the proper adjusting entry,based on a prepaid insurance account balance before adjustment of $14,000 and unexpired insurance of $3,000,for the fiscal year ending on April 30?

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.

At the end of the fiscal year,the usual adjusting entry to prepaid insurance to record expired insurance was omitted.Which of the following statements is true?

The matching principle

At the end of April,the first month of the company's year,the usual adjusting entry transferring rent earned to a revenue account from the unearned rent account was omitted.Indicate which items will be incorrectly stated,because of the error,on (a)the income statement for April and (b)the balance sheet as of April 30.Also indicate whether the items in error will be overstated or understated.

Vertical analysis compares each item in a financial statement with a total amount from the same statement.

The balance in the supplies account before adjustment at the end of the year is $6,250.The proper adjusting entry if the amount of supplies on hand at the end of the year is $1,500 would be

A business pays biweekly salaries of $20,000 every other Friday for a ten-day period ending on that day.The adjusting entry necessary at the end of the fiscal period ending on the second Wednesday of the pay period includes a

Which of the following is an example of an accrued expense?