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Exam 3: Adjusting the Accounts

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Question 31

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At March 1, Psychocandy Inc.reported a balance in Supplies of $200.During March, the company purchased supplies for $750 and consumed supplies of $800.If no adjusting entry is made for supplies

A) stockholders' equity will be overstated by $800.
B) expenses will be understated by $750.
C) assets will be understated by $250.
D) net income will be understated by $800.

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Question 32

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Unearned revenue is classified as

A) an asset account.
B) a revenue account.
C) a contra-revenue account.
D) a liability account.

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Question 33

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On January 1, 2022, Superfuzz Company purchased equipment for $40,000.The company is depreciating the equipment at a rate of $800 per month.The book value of the equipment at December 31, 2022 is

Accrued revenues are revenues that have been recognized and received before financial statements have been prepared.

At December 31, 2022, before any year-end adjustments, Murmur Company's Insurance Expense account had a balance of $2,450 and its Prepaid Insurance account had a balance of $3,800.It was determined that $2,800 of the Prepaid Insurance had expired.The adjusted balance for Insurance Expense for the year would be

The expense recognition principle requires that expenses be matched with revenues.

Alternative adjusting entries do not apply to

A new accountant working for Spirit Walker Company records $900 Depreciation Expense on store equipment as follows: The effect of this entry is to

If a business pays rent in advance and debits a Prepaid Rent account, the company receiving the rent payment will credit

Adjusting entries can be classified as

The expense recognition principle matches

Crue Company had the following transactions during 2022: Sales of $4,800 on account to 1. Collected $2,000 for services to 1. Paid $1,625 cash in salaries Purchased airline tickets for $250 in December for a trip to take place in 2023 What is Crue's 2022 net income using accrual accounting-basis?

The economic entity assumption states that economic events can be identified with a particular unit of accountability.

Adjusting entries are recorded in the general journal but are not posted to the accounts in the general ledger.

If a company fails to make an adjusting entry to record supplies expense, then

The time period assumption states that the economic life of a business entity can be divided into artificial time periods.

Blue Guitar Music School borrowed $30,000 from the bank signing an 8%, six-month note on November 1.Principal and interest are payable to the bank on May 1.If the company prepares monthly financial statements, what adjusting entry should the company make at November 30 with regard to the note (round answer to the nearest dollar)?

The revenue recognition principle dictates that revenue be recognized in the accounting period in which cash is received.

A common application of the cost constraint is weighing the factual nature of cost figures versus the relevance of fair value.

If an adjusting entry is not made for an accrued revenue,