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Exam 3: The Adjusting Process

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Question 51

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On November 1,clients of Great Designs Company prepaid $4,250 for services to be provided in the future at a rate of $85 per hour.​ (a)Journalize the receipt of cash. (b)As of November 30,Great Designs shows that 15 hours of services have been provided on this agreement. Prepare the necessary journal entry. (c)Determine the total unearned fees in hours and dollars at November 30.

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Question 52

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A company receives $360 for a 12-month trade magazine subscription on August 1.The adjusting entry on December 31 is a debit to Unearned Subscription Revenue of $150 and a credit to Subscription Revenue of $150.

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B) False

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Question 53

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Generally accepted accounting principles require that companies use the ____ of accounting.

Generally accepted accounting principles require the accrual basis of accounting.

Record journal entries for the following transactions.​​ (a)On December 1,$18,000 was received for a service contract to be performed from December 1 through April 30.​ (b)Assuming the work is performed evenly throughout the contract period,prepare the adjusting journal entry on December 31.

Buster Industries pays weekly salaries of $30,000 on Friday for a five-day week ending on that day.The adjusting entry necessary at the end of the fiscal period ending on Tuesday is

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.

On January 1,Great Designs Company had a debit balance of $1,450 in the office supplies account.During the month,Great Designs purchased $115 and $160 of office supplies and journalized them to the asset account upon purchasing.On January 31,an inspection of the office supplies cabinet shows that only $350 of office supplies remains.Prepare the January 31 adjusting entry for office supplies.

REM Consulting is completing the accounting information processing at the end of the fiscal year,December 31.The following trial balances are available.​​ ​ (a) Reconstruct the adjusting entries and give a brief explanation of each. (b) What is the amount of net income?

Identify the effect (a through h) that omitting each of the following items would have on the balance sheet. -Interest earned on a note receivable was not recorded.

Which of the following accounting steps in the accounting process would be completed last?

Match the type of account (a through e) with the business transactions that follow. -Received payment covering a six-month magazine subscription.

(a)Explain the differences between accrued revenues and unearned revenues. (b)Explain the differences between accrued expenses and prepaid expenses. (c)Give an example of each.

Supplies are recorded as assets when purchased.Therefore,the credit to Supplies in the adjusting entry is for the amount of supplies

The supplies account had a balance of $4,400 at the beginning of the year and was debited during the year for $2,400,representing the total of supplies purchased during the year.If $400 of supplies are on hand at the end of the year,the supplies expense to be reported on the income statement for the year is

Match the type of account (a through e) with the business transactions that follow. -Services provided that have not been recorded.

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.

On March 1,a business paid $3,600 for a 12-month liability insurance policy.On April 1,the business entered into a two-year rental contract for equipment at a total cost of $18,000.Determine the following amounts:​ (a) Insurance expense for the month of March (b) Balance in prepaid insurance as of March 31 (c) Equipment rent expense for the month of April (d) Balance in prepaid equipment rental as of April 30

The matching principle requires expenses be recorded in the same period that the related revenue is recorded.