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Exam 3: The Adjusting Process

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Question 91

Multiple Choice

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Accrued expenses are ordinarily reported on the balance sheet as

A) assets
B) liabilities
C) fixed assets
D) prepaid expenses

E) All of the above
F) C) and D)

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Question 92

Multiple Choice

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

A) Increase assets, increase revenues
B) Increase liabilities, increase revenues
C) Decrease liabilities, increase revenues
D) Decrease liabilities, decrease revenues

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

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Question 93

Multiple Choice

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The adjusting entry to adjust supplies was omitted at the end of the year. This would effect the income statement by having

At January 31, the end of the first month of the year, the usual adjusting entry transferring expired insurance to an expense account is omitted. Which items will be incorrectly stated, because of the error, on (a) the income statement for January and (b) the balance sheet as of January 31? Also indicate whether the items in error will be overstated or understated.

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

The matching concept requires expenses be recorded in the same period that the related revenue is recorded.

Complete the missing items in the following chart:

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

The revenue recognition concept

The adjusting entry for rent earned that was previously recorded in the unearned rent account is

A business pays bi-weekly salaries of $20,000 every other Friday for a ten-day period ending on that day. The last pay day of December is Friday, December 27. Assuming the next pay period begins on Monday, December 30, journalize the adjusting entry necessary at the end of the fiscal period (December 31).

The adjusted trial balance verifies that total debits equals total credits before the adjusting entries are prepared.

On January 1, DogMart Company purchased a two-year liability insurance policy for $22,800 cash. The purchase was recorded to Prepaid Insurance. Prepare the January 31 adjusting entry.

Adjusting entries are made at the end of an accounting period to adjust accounts on the balance sheet.

A company purchases a one-year insurance policy on June 1 for $2,760. The adjusting entry on December 31 is

Requirement: Make the journal entries for both of the following: (a) On December 1, $18,000 was received for a service contract to be performed from December 1 through until April 30. (b) If the service work for this contract is performed evenly and on a regular basis throughout this period, prepare the adjusting journal entry as of year-end, December 31.

Unearned revenue is a liability.

The systematic allocation of land's cost to expense is called depreciation.

Adjusting journal entries are dated on the last day of the period.