Accounting 2 test

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

One of the major advantages of making adjustments in order to improve the quality of financial statements is that they:

at the end of the accounting period.

Adjusting entries are typically prepared:

an asset account is decreased and an expense is recorded.

If certain assets are partially used up during the accounting period, then

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

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

assets to increase

The accrual adjustment recorded to adjust for revenues earned but not yet collected will cause:

An accrual adjustment

A 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?

The Cash account should be adjusted for the effects of accrued revenues and expenses during the accounting period.

Which of the following statements about the need to make accrual adjustments at the end of the accounting period is not correct?

involve previously recorded assets and liabilities and accrual adjustments involve previously unrecorded assets and liabilities

One major difference between deferral and accrual adjustments is that deferral adjustments:

an expense is recorded.

When existing assets are used up in the ordinary course of business:

Interest Receivable

An example of an account that could be included in an accrual adjustment for revenue is:

asset

Adjustments ensure that \____ balances are reported at amounts representing the economic benefits that remain at the end of the period and will be used-up in future periods.

a liability is increasing since cash will be paid in the future due to the expense incurred

In an accrual adjustment for expenses incurred but not yet paid:

Prepare a post-closing trial balance

Which of the following is performed last at the end of the year?

assets and revenues or increasing liabilities and expenses.

Accrual adjustments involve increasing

A deferral adjustment that decreases an asset will include an increase in an expense.

Which of the following statements about adjustments is correct?

an asset is increased since cash will be collected at a later date

In recording an accrual adjustment to account for revenues earned but not yet collected:

liabilities to increase

The accrual adjustment recorded to adjust for expenses incurred but not yet paid will cause:

expenses the amount used during the period

A deferral adjusting entry that adjusts assets (such as prepaids and supplies):

will be reported as a revenue or an expense in a later period

Deferring a revenue or expense account in accounting means that the amount:

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

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

both income statement and balance sheet accounts.

Adjusting entries affect:

Deferral adjustments decrease assets and increase expenses.

How do deferral adjustments for prepaid expenses—such as rent—that were initially recorded as assets affect assets on the balance sheet and expenses on the income statement?

deferral adjustment.

The company uses up $5,000 of an existing asset and the company adjusts its accounts accordingly. This is an example of a(n):

the liability recorded when cash was received is decreased by the adjustment for revenue being earned

In a deferral adjustment for revenues collected in advance that are now earned:

revenue account was increased by the same amount.

A company makes a deferral adjustment that decreased a liability. This must mean that a(n):

Interest Payable.

An example of an account that could be included in an accrual adjustment for expense is:

Deferral adjustments are required to update previously recorded items whereas accrual adjustments are required to include items not previously recorded.

What is the main difference between accrual and deferral adjustments?

On January 10

A company billed a client for services performed on January 10. The customer paid one-half of the amount owed on January 20 and the other one-half on February 24. When should the company record the related Service Revenue?

Which of the following statements about adjustments is not correct?

Which of the following statements about adjustments is not correct?

often result in cash receipts from customers in the next period.

Accrued revenues recorded at the end of the current year:

Accrual adjustments can increase assets and increase revenues.

How can accrual adjustments for interest earned but not yet collected affect the balance sheet and the income statement?

Which of the following statements about adjustments is not correct?

When making an adjustment to recognize supplies used in a period, total assets will not change.

Which of the following types of transactions could be an accrual adjustment?

An increase to an asset account and an increase to a revenue account

Adjustments to revenue accounts at the end of the accounting period are made to adhere to accrual accounting principles, specifically the \______ principle.

revenue recognition

The term, deferral, best describes a situation in which:

cash is paid in advance of recognizing an expense.

One type of deferral adjustment reduces the balance in a(n) \______ account on the balance sheet and transfers that reduction into a(n) \______ account on the income statement.

asset; expense

The adjusting entry to record the amount earned that previously had been collected in advance will:

decrease liabilities and increase revenue

Adjustments help to ensure that all \______ are recorded in the period in which they are incurred.

expenses

If an expense has been incurred but will be paid later, then:

a liability account is created or increased and an expense is recorded.

When a deferral adjustment is made to an asset account, that asset becomes a(n):

expense.

The deferral adjustment to record the amount of unearned service revenue that is now earned includes a:

debit to Unearned Revenue

Which of the following is performed first at the end of each accounting period?

Prepare adjusting entries

How do accrual adjustments affect liabilities and expenses?

adjustments can increase liabilities and increase expenses.

Which of the following statements about adjusting entries is not correct?

Adjusting entries often affect the cash account.

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.

The book value of equipment is equal to which of the following?

Cost of equipment less the related accumulated depreciation

After the adjustments have been completed, the adjusted balance in the Depreciation Expense account represents the:

depreciation for the current period

The purpose of recording an adjusting entry for salaries and wages is to record wages:

incurred but not yet paid

The unadjusted trial balance is a key starting point for the adjustment process. Which of the following accounts is unlikely to be affected by an adjusting entry?

Cash

The purpose of adjusting entries for income taxes is to record income taxes \______ the accounting period.

accrued, but have not been paid, at the end of

Which of the following statements is correct regarding the use of the cash account in deferral and accrual adjustments at the end of the accounting period?

Cash is never involved in end-of-period deferral or accrual adjustments.

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

Depreciation contains depreciation since the asset was purchased.

Amortization is the expensing of:

long-term assets that lack physical substance.

Which of these accounts would normally not be affected by an adjustment?

The Cash Account

Which of the following is a correct statement about the nature of equipment?

While equipment is an asset, its use is recorded as an expense

After the adjustments have been completed, the adjusted balance in the Supplies account represents the cost of supplies:

on hand at the end of the accounting period

The Accumulated Depreciation account is a(n):

contra-asset account.

How does the adjustment for depreciation differ from other deferral adjustments?

The depreciation adjustment uses a contra-asset account rather than reducing the asset accounts directly.

carrying

Long-lived assets, such as equipment, are reported at their \______ value on the balance sheet

revenues earned during the period but not yet collected

Accounts Receivable should be increased for

expensing of long-term assets that lack physical substance over their useful lives

Amortization is the concept that applies to the:

value of the insurance prepayment that remains to benefit future periods

The balance in the Prepaid Insurance account after the adjusting entries have been recorded represents the:

cost of rent for the accounting period

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

balance sheet as a contra- asset account.

Accumulated Depreciation appears on the:

total depreciation taken on the long-lived assets since their purchase

After the adjustments have been completed, the adjusted balance in the Accumulated Depreciation account represents the:

In the period the supplies are used, regardless of when they were purchased

When should supplies be recorded as an expense?

Accrual value

Which of the following is not a term for the value at which an asset is reported on a financial statement?

amount of the sales or services still owed to the customer

After the adjustments have been completed, the adjusted balance the Unearned Revenue represents the:

interest that has accrued, but has not been paid, at the end of the period

After the adjustments have been completed, the adjusted balance in the Interest Payable account represents:

depreciation.

The process of allocating the cost of buildings, vehicles, and equipment to the accounting periods in which they are used is called:

Total assets will increase and total stockholders' equity will increase.

What are the effects on the financial condition of the business from the adjustment for revenues earned, but not yet collected, during the accounting period?

A decrease in assets, a decrease in stockholders' equity, and an increase in expenses

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

Supplies Expense; Supplies

The adjustment for supplies used during the period will result in a debit to the \______ account and a credit to the \______ account.

decrease to Supplies and an increase to Supplies Expense

The adjusting entry to record the supplies used during the period will result in a(n):

Salaries and Wages Payable and Credit to Cash.

An adjustment to accrue the amount of salaries and wages owed was recorded on December 31. These salaries and wages were paid on the following January 5. The entry on January 5 would include a debit to:

Total assets will increase and total stockholders' equity will increase.

What are the effects on the accounting equation from the adjustment for depreciation?

Debit Interest Expense and credit Interest Payable

A company has a loan that accrues interest at a rate of $20 a day. The company pays the interest once a quarter. Which of the following adjustments would be made at the end of a month in which no payment for interest was made?

Salaries and Wages Payable on the balance sheet will be $500.

A company incurred $5,000 in salaries and wages for employees for the year; $4,500 of these salaries and wages had been paid by the end of the year. Which of the following statements about this situation is correct?

Total liabilities will increase and total stockholders' equity will decrease.

What are the effects on the accounting equation from the adjustment for salaries and wages incurred, but not yet paid, during the accounting period?

adjusted income (before income taxes) and the company's tax rate.

To calculate the company's income tax expense for the current period, it is necessary to know the company's:

Interest Payable

Which of the following account balances will typically be increased as a result of adjusting entries?

expense account.

An adjusting journal entry that includes an increase to an asset contra-account would also include an increase in a(n):

are reported only on the statement of retained earnings.

Dividends:

Unearned Revenue and a credit to Service Revenue.

Baylor Service Corp. redeemed $1,000 of gift cards that customers used to pay for services that were performed by the company. The related adjusting entry would include a debit to:

The company should debit Insurance Expense for $980 and credit Prepaid Insurance for $980.

The Prepaid Insurance account has a normal balance of $3,750 at the beginning of the month. The company used $980 of insurance coverage during the month. Which of the following statements is correct?

Revenues are earned but have not been collected or recorded at the end of the period.

When will Accounts Receivable be involved in an adjusting entry?

Decrease assets; No effect on liabilities; Decrease stockholders' equity

What is the effect of the adjusting entry for depreciation on the accounting equation?

decrease, increase

A prepayment is originally recorded as an asset. Later, at the end of the accounting period, an adjustment is recorded causing a(n) \______ in the asset account and a(n) \______ in the expense account.

decrease in an asset and an equal increase in expenses.

During the month, a company uses up $4,000 of supplies. At the end of the month, the related adjusting journal entry would result in a(n):

after the account it offsets but in the opposite column.

When a trial balance is prepared, a contra-account appears immediately:

Salaries and Wages Payable will decrease and Cash will decrease.

Recognizing that Salaries and Wages Payable (resulting from adjustments at the end of the period) will be paid in a future period, what will be the effect on the accounts when the salaries and wages are paid?

The account represents tax refunds due to the company.

Which of the following is incorrect regarding the Income Tax Payable account?

Salaries and Wages Expense and a credit to Salaries and Wages Payable for $700.

A company pays salaries and wages every two weeks. Salaries and wages amount to $100 a day and the company has a seven-day work week. On March 31, the company pays wages for the two weeks ending March 24 and recorded the related journal entry. The adjusting journal entry, dated March 31, to record unpaid wages and salaries owed since March 25 will include a debit to

Interest on the note payable is classified as an expense since it is a cost of borrowing

Which of the following statements is correct regarding the adjustment to record interest accrued on a note payable?

Total liabilities will increase and total stockholders' equity will decrease.

What are the effects on the accounting equation from the adjustment for income tax expense accrued, but not paid, at the end of the accounting period?

a debit to Accounts Receivable and credit to Service Revenue

The adjusting entry to record services earned but not yet billed requires:

Accounts Receivable

After posting the adjusting entry to record revenues earned but not yet collected, which account will be increased?

Amortization Expense; Accumulated Amortization

Sonic Gateway purchased $1,000 of app software that is estimated to have four years of usefulness. The adjusting entry to record the amortization includes a debit to \______ and a credit to:

Total liabilities will decrease and total stockholders' equity will increase.

What are the effects on the accounting equation from the adjustment for revenue earned during the accounting period that had previously been recorded as a liability?

Debit Interest Expense and credit Interest Payable for $500

On December 31, 2015, interest of $500 is owed on a bank loan that will not be paid until June 30, 2016. What is the necessary adjusting journal entry on December 31, 2015?