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Exam 3: The Adjusting Process

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Question 1

Multiple Choice

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If there is a balance in the prepaid rent account after adjusting entries are made, it represents a(n)

A) deferral
B) accrual
C) revenue
D) liability

E) B) and D)
F) A) and B)

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Question 2

Multiple Choice

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Adjusting entries are

A) the same as correcting entries
B) needed to bring accounts up to date and match revenue and expense
C) optional under generally accepted accounting principles
D) rarely needed in large companies

E) C) and D)
F) A) and B)

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Question 3

Multiple Choice

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Deferred expenses have

An adjusting entry would adjust an expense account so the expense is reported when incurred.

By matching revenues and expenses in the same period in which they incur

A company pays $36,000 for twelve month's rent on October 1. The adjusting entry on December 31 is debit Rent Expense, $9,000 and credit Prepaid Rent, $9,000.

If the adjustment for accrued salaries at the end of the period is inadvertently omitted, both liabilities and stockholders' equity will be understated for the period.

Using accrual accounting, revenue is recorded and reported only

Complete the missing items in the following chart:

On January 1st, Power House Co. prepays the year's rent, $10,140 to its landlord. Prepare the journal entry by recording the prepayment to an asset account.

On March 1, a business paid $3,600 for a twelve month liability insurance policy. On April 1 the same business entered into a two-year rental contract for equipment at a total cost of $18,000. Determine the following amounts:

Prepare the December 31 adjusting entries based on the following information. Omit explanations. 1. Fees accrued but unbilled total $4,500. 2. The supplies account balance on December 31 is $5,250. Supplies on hand are $1,015. 3. Wages accrued but not paid are $3,500. 4. Depreciation of office equipment is $2,200. 5. Rent expired during year, $7,800.

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

On November 15th, Great Designs Company purchased an advertising campaign for the month of December. Great Designs paid cash of $2,700 in advance. The advertising campaign ran in December. (a) Prepare all necessary journal entries for the advertising campaign for November and December. (b) Explain why you prepared this/these journal entries.

Adjustments for accruals are needed to record a revenue that has been earned or an expense that has been incurred but not recorded.

What effect will this adjusting journal entry have on the accounting records?

Using accrual accounting, expenses are recorded and reported only

The balance in the unearned fees account, before adjustment at the end of the year, is $10,250. Journalize the adjusting entry required if the amount of unearned fees at the end of the year is $3,125.

For each of the following errors, considered individually, indicate whether the 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.

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.