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Exam 3: The Adjusting Process

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Question 71

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If the adjustment of the unearned rent account at the end of the period to recognize the amount of rent earned is inadvertently omitted, the net income for the period will be understated.

A) True
B) False

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Question 72

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

A) True
B) False

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Question 73

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Data for an adjusting entry described as "accrued revenue, $3,100" requires a

Prior to the adjusting process, accrued revenue has

Bloom's Company pays biweekly salaries of $40,000 every other Friday for a ten-day period ending on that day. The last payday of December is Friday, December 27. Assuming the next pay period begins on Monday, December 30, journalize the adjusting entry necessary at the end of the fiscal period (December 31).

The systematic allocation of land's cost to expense is called depreciation.

At January 31, the end of the first month of the year, the usual adjusting entry transferring expired insurance to an expense account is omitted. Which items will be incorrectly stated, because of the error, on (a) the income statement for January and (b) the balance sheet as of January 31? Also indicate whether the items in error will be overstated or understated.

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.​ The entry for $975 of supplies used during the period was journalized as a debit to Supplies Expense for $795 and credit to Supplies for $975.

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

On January 2, Dog Mart prepaid $30,000 rent for the year and recorded the prepayment in an asset account. Prepare the January 31 adjusting entry for rent expense.

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

The company determines that the interest expense on a note payable for the period ending December 31 is $775. This amount is payable on January 1. Prepare the journal entries required on December 31 and January 1.

A business makes a loan payment on the 15^th of each month. At the end of December, it has accrued 16 days worth of interest on the loan, which amounts to $450. The adjusting entry necessary at the end of the fiscal period ending December 31 would be recorded as a

If the effect of the debit portion of an adjusting entry is to increase the balance of an asset account, which of the following describes the effect of the credit portion of the entry?

List the four basic types of accounts that require adjusting entries and give an example of each. 1. Prepaid expenses; example: prepaid insurance 2. Unearned revenues; example: an attorney's retainer fee 3. Accrued revenues; example: unpaid interest earned on a note receivable 4. Accrued expenses; example: unpaid wages owed to employees 157. Under the accrual basis, some accounts in the ledger require updating at the end of the period. Discuss the three main reasons for this updating and give an example of each.

Identify the effect (a - h) that omitting each of the following items would have on the balance sheet.a.Assets and stockholders' equity overstated b.Assets and stockholders' equity understated c.Assets overstated and stockholders' equity understated d.Assets understated and stockholders' equity overstated e.Liabilities and stockholders' equity overstated f.Liabilities and stockholders' equity understated g.Liabilities overstated and stockholders' equity understated h.Liabilities understated and stockholders' equity overstated -Wages are paid every Friday for the 5-day work week. The month ended on Monday and no adjustment was recorded.

The revenue recognition principle states that revenue should be recorded in the same period as the cash is received.

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

Adjusting entries always include

Depreciation on equipment for the year is $6,300.(a) Record the journal entry if the company prepares adjustments once a year.(b) Record the journal entry if the company prepares adjustments on a monthly basis.