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Exam 3: Adjustments: Accruals and Deferrals

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Question 41

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On December 31, a business estimates depreciation on equipment used during the first year of operations to be $2,900. (a) Journalize the adjusting entry required on December 31. (b) If the adjusting entry in (a) were omitted, which items would be erroneously stated on (1) the income statement for the year and (2) the balance sheet as of December 31?

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Question 42

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

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Question 43

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

Which of the following is the proper adjusting entry, based on a prepaid insurance account balance before adjustment of $14,000 and unexpired insurance of $3,000, for the fiscal year ending on April 30?

Which of the accounting steps in the accounting process below would be completed last?

Prepaid rent, representing rent for the next six months' occupancy, would be reported on the tenant's balance sheet as a(n)

Accrued salaries of $600 owed to employees for December 29, 30, and 31 are not taken into consideration in preparing the financial statements for the year ended December 31. Indicate which items will be erroneously stated, because of the error, on (a) the income statement for the year and (b) the balance sheet as of December 31. Also indicate whether the items in error will be overstated or understated.

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.

Which account would normally not require an adjusting entry?

(a) Explain the differences between accrued revenues and unearned revenues. (b) Explain the differences between accrued expenses and prepaid expenses. (c) Give an example of each.

Which of the following is an example of a prepaid expense?

The unearned rent account has a balance of $72,000. If $18,000 of the $72,000 is unearned at the end of the accounting period, the amount of the adjusting entry is

On December 15, Great Designs Company hired an independent contractor for a project. The contractor completed the project on December 29 and submitted an invoice for $2,425 which was due on January 15. The amount was duly paid on January 15. ​ (a) Prepare the journal entry or entries necessary to record these transactions. (b) Explain why you prepared this/these journal entries.

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

Adjusting entries affect balance sheet accounts to the exclusion of income statement accounts.

A company pays an employee $3,000 for a five-day work week, Monday-Friday. The adjusting entry on December 31, which is a Wednesday, is a debit to Wages Expense, $1,800, and a credit to Wages Payable, $1,800.

Which of the following pairs of accounts could not appear in the same adjusting entry?

Accrued expenses are ordinarily reported on the balance sheet as

Which of the following is an example of accrued revenue?

Which of the accounts below would most likely appear on an adjusted trial balance but probably would not appear on the unadjusted trial balance?