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Exam 3: The Adjusting Process

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Question 81

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The adjustment for accrued fees was debited to Accounts Payable instead of Accounts Receivable. This error will be detected when the Adjusted Trial Balance is prepared.

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Question 82

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Which of the following is not a characteristic of accrual basis of accounting?

A) Revenues and expenses are reported in the period in which cash is received or paid
B) Revenues are reported on the income statement in the period in which they are earned
C) Accrual basis of accounting supports the matching concept
D) Expenses are reported in the same period as the revenues to which they relate

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Question 83

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Prepare the December 31 adjusting entries for the following transactions. Omit explanations. 1. Fees accrued but unbilled total $6,300. 2. The supplies account balance on December 31 is $4,750. Supplies on hand are $960. 3. Wages accrued but not paid are $2,700. 4. Depreciation of office equipment is $1,650. 5. Rent expired during year, $10,800.

If the adjustment for accrued salaries at the end of the period is inadvertently omitted, both liabilities and owner's equity will be understated for the period.

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 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.

An adjusting entry would adjust revenue so it is reported when earned and not when cash is received.

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?

The account type and normal balance of Unearned Revenue is

An adjusting entry would adjust an expense account so the expense is reported when incurred.

Accumulated Depreciation is reported on the income statement.

Explain the difference between accrual basis accounting and cash basis accounting.

When preparing an income statement vertical analysis, each revenue and expense is expressed as a percent of net income.

All of the following statements regarding vertical analysis are true except:

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.

The type of account and normal balance of Unearned Rent is

Prepaid advertising, representing payment for the next quarter, would be reported on the balance sheet as a(n)

A one-year insurance policy was purchased on June 1, 2011 for $1,500. The adjusting entry on December 31, 2011 would be:

Journalize the six entries to adjust the accounts at December 31. (Hint: One of the accounts was affected by two different adjusting entries).

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

List the four basic types of accounts that require adjusting entries and give an example of each.