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Exam 3: The Adjusting Process

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Question 101

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A company realizes that the last two days' revenue for the month was billed but not recorded. The adjusting entry on December 31 is a debit to Accounts Receivable and a credit to Fees Earned.

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Question 102

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What is the purpose of the adjusted trial balance?

A) to verify that all of the adjusting entries have been posted
B) to verify that the net income (loss) is correctly reported
C) to verify that no adjusting journal entry has been omitted
D) to verify that the debits and credits balance

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Question 103

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Revenues and expenses should be recorded in the same period to which they relate.

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.

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

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

The entry to adjust the accounts for salaries accrued at the end of the accounting period is

On December 31, a business estimates depreciation on equipment used during the first year of operations to be $2,900. (a) Journalize the adjusting entry required on December 31. (b) If the adjusting entry in (a) were omitted, which items would be erroneously stated on (1) the income statement for the year and (2) the balance sheet as of December 31?

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 entry for $975 of supplies used during the period was journalized as a debit to Supplies Expense for $795 and credit to Supplies for $975.

Match the type of account (a through e) with the business transactions that follow. -Paid six months of rental payments to the landlord.

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?

All of the following statements regarding vertical analysis are true except

Which of the following accounts would likely be included in a deferral adjusting entry?

The following adjusting journal entry does not include an explanation. Select the best explanation for the entry. $\begin{array} { | c | r | r | } \hline \text { Supplies Expense } & 730 & \\\hline \text { Supplies } & & 730 \\\hline ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? & & \\\hline\end{array}$

A one-year insurance policy was purchased on June 1 for $2,400. The adjusting entry on December 31 would be: $\begin{array} { | c | c | c | c | c | } \hline \text { Date } & \text { Description } & \text { Post. Ref. } & \text { Debit } & \text { Credit } \\\hline & & & & \\\hline & & & & \\\hline\end{array}$

Complete the missing items in this summary of adjustments chart:

Identify the effect (a through h) that omitting each of the following items would have on the balance sheet. -Services provided to customers on the last day of the month were not billed.

Two income statements for Danielle's Design Services are shown below.​ (a) Prepare a vertical analysis of Danielle's Design Services income statements. (b) What types of trends are indicated: favorable or unfavorable? (c) What other information would enhance the analysis?

Salaries of $6,400 are paid for a five-day week on Friday. Prepare the adjusting journal entry that is required if the month ends on Thursday.

The accounting principle upon which deferrals and accruals are based is