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Exam 3: The Adjusting Process

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Question 51

True/False

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At year-end, the balance in the prepaid insurance account, prior to any adjustments, is $6,000. The amount of the journal entry required to record insurance expense will be $4,000 if the amount of unexpired insurance applicable to future periods is $2,000.

A) True
B) False

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Question 52

Multiple Choice

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By matching revenue earned during the accounting period to related incurred expenses,

A) net income or loss will always be underestimated
B) net income or loss will always be overestimated
C) net income or loss will be properly reported on the income statement
D) net income or loss will not be determined

E) B) and D)
F) All of the above

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Question 53

Multiple Choice

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For the year ending December 31, Orion, Inc. mistakenly omitted adjusting entries for $1,500 of supplies that were used, (2) unearned revenue of $4,200 that was earned, and (3) insurance of $5,000 that expired. For the year ending December 31, what is the effect of these errors on revenues, expenses, and net income?

If the adjustment to recognize expired insurance at the end of the period is inadvertently omitted, the assets at the end of the period will be understated.

Accrued revenues would affect _______ on the balance sheet.

The updating of accounts when financial statements are prepared is called the adjusting process.

The account type and normal balance of Prepaid Expense would be

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

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.

Accruals are needed when an unrecorded expense has been incurred or an unrecorded revenue has been earned.

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

When is the adjusted trial balance prepared?

Using accrual accounting, expenses are recorded and reported only

Journalize the six entries to adjust the accounts at December 31. (Hint: One of the accounts was affected by two different adjusting entries).?? ???????????????????????

On December 31, the balance in the office supplies account is $1,385. A physical count shows $435 worth of supplies on hand. Prepare the adjusting entry for supplies.

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.

The unexpired insurance at the end of the fiscal period represents a (n)

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?

Data for an adjusting entry described as "accrued wages, $2,020" requires a

A business pays biweekly salaries of $20,000 every other Friday for a 10-day period ending on that day. The last payday of December is Friday, December 27. Assume the next pay period begins on Monday, December 30 and the proper adjusting entry is journalized at the end of the fiscal period (December 31). Journalize the entry for the payment of the payroll on Friday, January 10. $\begin{array} { | c | c | c | c | c | } \hline \text { Date } & \text { Description } & \begin{array} { c } \text { Post. } \\\text { Ref. }\end{array} & \text { Debit } & \text { Credit } \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline\end{array}$