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Exam 3: The Adjusting Process

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Question 21

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How will the following adjusting journal entry affect the accounting equation?

A) increase assets, increase revenues
B) increase liabilities, increase revenues
C) decrease liabilities, increase revenues
D) decrease liabilities, decrease revenues

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

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Question 22

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Prepaid advertising,representing payment for the next quarter,would be reported on the balance sheet as

A) an asset
B) a liability
C) a contra asset
D) owner's equity

E) A) and D)
F) None of the above

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Question 23

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An adjusting entry would adjust revenue so it is reported when earned and not when cash is received.

Indicate with a Yes or No whether or not each of the following accounts would,under normal circumstances,require an adjusting entry.1.Cash2.Prepaid Expenses3.Depreciation Expense4.Accounts Payable5.Accumulated Depreciation6.Equipment

The revenue recognition principle requires that the reporting of revenue be included in the period when cash for the service is received.

Prepaid expenses are eventually expected to become

Identify the effect (a through h) that omitting each of the following items would have on the balance sheet. -Services provided to customers on the last day of the month were not billed.

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.

For each of the following,journalize the necessary adjusting entry:

On January 1,Power House Co.prepaid the annual rent of $10,140.Prepare the journal entry to record this transaction.

At the end of the current year,fees of $3,700 have been earned but have not been billed to clients.Journalize the adjusting entry to record the accrued fees.

Which of the following is an example of an accrued expense?

Two income statements for Danielle's Design Services are shown below.​ (a) Prepare a vertical analysis of Danielle's Design Services income statements. (b) What types of trends are indicated: favorable or unfavorable? (c) What other information would enhance the analysis?

Adjusting journal entries are dated on the last day of the period.

Match the type of account (a through e) with the business transactions that follow. -Electric bill to be paid next month.

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

Match the type of account (a through e) with the business transactions that follow. -A contract to provide tutoring services beginning next month was signed.

The adjusting entry to adjust supplies was omitted at the end of the year.This would affect the income statement by having

The financial statements are prepared from the unadjusted trial balance.

The difference between deferred revenue and accrued revenue is that accrued revenue has been recorded and needsadjusting and deferred revenue has never been recorded.