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Exam 3: The Adjusting Process

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Question 91

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Which of the accounting steps in the accounting process below would be completed last?

A) preparing the adjusted trial balance
B) posting
C) preparing the financial statements
D) journalizing

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Question 92

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Adjusting entries affect only expense and asset accounts.

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Question 93

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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.

For each of the following errors, considered individually, indicate whether the error would cause the adjusted trial balance totals to be unequal. If the error would cause the adjusted trial balance totals to be unequal, indicate whether the debit or credit total is higher and by how much.

Two income statements for PS Enterprises are shown below: (a) Prepare a vertical analysis of PS Enterprises' income statements. (b) Does the vertical analysis indicate a favorable or unfavorable trend?

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

Prepaid expenses are eventually expected to

Unearned rent, representing rent for the next six months' occupancy, would be reported on the landlord's balance sheet as a(n)

Austin, Inc. made a Prepaid Rent payment of $3,500 on January 1st. The company's monthly rent is $700. The amount of Prepaid Rent that would appear on the January 31 balance sheet after adjustment is:

The financial statements are prepared from the unadjusted trial balance.

Proper reporting of revenues and expenses in a period is due to the accounting period concept.

Deferrals are recorded transactions that delay the recognition of an expense or revenue.

For the year ending December 31, 2010, Nathan Clinical Supplies Co. mistakenly omitted adjusting entries for (1) $8,900 of unearned revenue that was earned, (2) earned revenue that was not billed of $10,200, and (3) accrued wages of $7,000. Indicate the combined effect of the errors on (a) revenues, (b) expenses, and (c) net income for 2010.

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

Supplies are recorded as assets when purchased. Therefore, the credit to supplies in the adjusting entry is for the amount of supplies

If the effect of the credit portion of an adjusting entry is to increase the balance of a liability account, which of the following describes the effect of the debit portion of the entry?

Accumulated Depreciation is reported on the income statement.

Indicate whether the following error would cause the adjusted trial balance totals to be unequal. If the error would cause the adjusted trial balance totals to be unequal, indicate whether the debit or credit total is higher and by how much.

An example of deferred revenue is Unearned Rent.