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Exam 3: The Adjusting Process

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Question 41

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A company pays $36,000 for 12 months' rent on October 1, recording the prepayment as an asset. The adjusting entry on December 31 is a debit to Rent Expense of $9,000, and a credit to Prepaid Rent of $9,000.

A) True
B) False

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Question 42

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At the end of the fiscal year, the following adjusting entries were omitted: (a)No adjusting entry was made to transfer the $1,750 of prepaid insurance from the asset account to the expense account. (b)No adjusting entry was made to record accrued fees of $525 for services provided to customers.Assuming that financial statements are prepared before the errors are discovered, indicate the effect of each error, considered individually, by inserting the dollar amount in the appropriate spaces. Insert "0" if the error does not affect the item.? ?

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Question 43

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By ignoring and not posting the adjusting journal entries to the appropriate accounts, net income will always be overstated.

Identify the effect (a through h) that omitting each of the following items would have on the balance sheet. -An attorney has earned half of a retainer fee that was received and recorded last month. No adjustment was recorded for the amount earned.

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.

Unearned revenue is a liability.

Using the following account balances for Garry's Tree Service, prepare a trial balance.​

The matching principle supports matching expenses with the related revenues.

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

Which of the following is considered to be unearned revenue?

The prepaid insurance account had a beginning balance of $6,600 and was debited for $2,300 for premiums paid during the year. Journalize the adjusting entry required at the end of the year, assuming the amount of unexpired insurance related to future periods is $4,100.

Fees payable would appear on the balance sheet as a (n)

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

Which of the following is not true regarding depreciation?

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

Vertical analysis compares each item in a financial statement with a total amount from the same statement.

Prepaid expenses are eventually expected to become

Adjusting entries affect only expense and asset accounts.

Zoey Bella Company has a payroll of $10,000 for a five-day workweek. Its employees are paid each Friday for the five-day workweek. Prepare the adjusting entry on December 31 assuming the year ends on Thursday.​ $\begin{array} { | c | c | c | c | c | } \hline \text { Date } & \text { Description } & \text { Post. Ref. } & \text { Debit } & \text { Credit } \\\hline & & & & \\\hline & & & & \\\hline\end{array}$

The balance in the prepaid rent account before adjustment at the end of the year is $32,000, which represents four months' rent paid on December 1. The adjusting entry required on December 31 is