Chapter 3

Questions I got wrong:

• Accrued expenses are those expenses that have occurred, but have not been paid or recorded

• To determine the amount of adjustment, you need to determine the amount of supplies that were used during the period. From the $1,200 worth of supplies at the beginning of the year, subtract the amount of supplies that are still left at the end of the year to get supplies used ($1,200 - $400 = $800 supplies used). Debit Supplies Expense and credit Supplies for this amount.

• When you have a credit balance and a credit adjustment, you add the amounts together (20,000 + 2,000 = $22,000) for the Adjusted Trial Balance.

• By accidently omitting an adjusting entry for the use of the one month of rent from the prepaid rent account, you would be omitting a debit to Rent Expense (which if omitted Net Income would be overstated and Expenses would be understated) and you would be omitting a credit to Prepaid Rent (which if omitted the Balance Sheet Assets would be overstated).

• By accidentally omitting an adjusting entry for salaries incurred but not paid, you would be omitting a debit to Salaries Expense (which if omitted Net Income would be overstated and expenses would be understated) and you would be omitting a credit to Salaries Payable (which if omitted the Balance Sheet liabilities would be understated).  

Questions I was unsure of:

• The worksheet does not replace a journal, ledger or financial statements. It summarizes the data for the preparation of the financial statements.

• The purpose of adjusting entries is to update the account balances at the end of each period to match revenues and expenses to the appropriate period