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Exam 3: Adjusting Accounts for Financial Statements

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Question 31

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Accrued revenues

A) Are paid in advance.
B) Are also called unearned revenues.
C) Are listed on the balance sheet as liabilities.
D) At the end of one accounting period often result in cash receipts from customers in the next period.
E) At the end of one accounting period often result in cash payments in the next period.

F) C) and D)
G) A) and E)

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Question 32

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The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is:

A) The matching principle.
B) The operating cycle of a business.
C) Cash basis accounting.
D) Accrual basis accounting.
E) The revenue recognition principle.

F) A) and E)
G) D) and E)

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Question 33

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MegaTech Company has total monthly revenues of $325,000 and expenses of $198,000 for the month ended July 31 before monthly adjusting entries are made. The following data are provided on the end of month adjustments to be made: a. Insurance expired in July, $2,520. b. Unbilled amounts to customers for July is $4,200. c. Salaries earned by employees but not yet paid by MegaTech for the last week of July, $13,125. d. Depreciation on equipment for July, $1,290. e. Supplies used in July, $1,650. f. Fees collected in advance from customers which have now been earned during July, $23,400. Complete the schedule below to determine the profit of MegaTech for July after these adjustments are recorded. Begin your schedule with income before adjusting entries and then show the effect of each adjustment to arrive at profit after adjustment.

The expense created by allocating the cost of plant and equipment to the periods in which they are used, representing the expense of using the assets, is called:

A broad principle that requires identifying the activities of a business with specific time periods such as months, quarters, or years is the:

The Creative Company has several insurance policies in force with payments due atvarious times. The following information refers to prepaid insurance and insurance expense on two successive dates. The amount of cash paid for insurance by Creative Company in 2016 was:

Adjusting entries are always dated at the end of the accounting period

A trial balance prepared before any adjustments have been recorded is

A business pays each of its two office employees each Friday at the rate of $60 per day for a five-day week that begins on Monday. If the accounting period ends on Tuesday and the employees worked on both Monday and Tuesday, the adjusting entry to record the salaries earned but unpaid is:

The equipment has a useful life of 8 years. Compute the book value of theequipment after the proper June adjustment has been made.

Explain the difference between the book value and the market value of an asset

Adjusting entries are posted to the general ledger

The timeliness principle assumes that an organization's activities can be divided intospecific time periods including:

Which of the following accounts is most likely to be associated with an accruedexpense?

The adjusting entry to record the earned but unpaid salaries of employees at the end of the accounting period is:

Correcting entries are a specialized type of adjusting entry

On December 31, 2015, the accountant for a proprietorship forgot to record$7,000 of depreciation on office equipment. In the 2015 financial statements, what is the effect of this error on assets, profit, and equity?

Discuss the types of adjusting entries used for prepaid expenses, depreciation,and unearned revenues.

Adjusting entries are journal entries made at the end of an accounting period for the purpose of:

An adjusting entry may include an entry to Cash