🧾 (CH4) ACC EXAM 2

Which of the following statements about the need for adjustments is not correct?

Adjusting entries are intended to change the operating results to reflect management's objectives for operating performance.

Adjusting entries often involve cash.

False

How does the timing of adjusting entries differ from the accounting for daily transactions?

Adjustments are made at the end of the accounting period because making them on a daily basis would be inefficient.

One of the major advantages of adjustments to help improve the quality of financial statements is that they

ensure that revenues and expenses are recognized during the period they are earned and incurred.

When recording an adjustment for the use of equipment during the current accounting period, which two accounts are affected?

Accumulated Depreciation and Depreclation Expense

Why is the balance in the Depreciation Expense account generally different from the balance in the Accumulated Depreciation account?

Depreciation expense only reflects the current period depreciation. Accumulated Depreciation contains depreciation since the asset was purchased.

Recording an adjusting journal entry to recognize depreciation would cause which of the following?

A decrease in assets, and an increase in expenses.

The adjusted trial balance should be prepared before the ____ are prepared in order to prove the equality of ____

Finical statements; Debits and credits

Ridge Crest Company has beginning Retained Earnings of $40,000, ending Retained Earnings of $42,000, and net income of $24,000. What was the amount of dividends declared during the year?

$22,000

the closing entry for revenues and expenses results in a credit to Retained Earnings for $3,600, the company had a net income of $3,600.

True

After the adjustments have been completed, the balance in the Rent Expense account represents

cost of rent incurred for the accounung period.

company owes rent at a rate of $6,000 per month. The company pays the rent owed on the tenth of each month for the previous month. At the end of each month, what kind of adjustment is required?

An accrual adjustment.

Which of the following best describes when an accrual adjustment is required?

An expense has been incurred but not yet paid in cash.

At the end of the year, accrual adjustments could include a

debit to an asset and a credit to a revenue

Closing entries

cause the revenue and expense accounts to have zero balances.

Permanent accounts include all asset, liability, and stockholders' equity accounts

True

Which of the following is the usual last step in the accounting cycle?

Preparing a post-closing trial balance

On December 31, 2022, the balance in Retained Earnings is $40,000. On December 31, 2023, the balance in Retained Earnings is $38,200. During 2023, dividends of $8,000 were declared and paid. What is the amount of net income for 2023?

$6,200