Accounting Ch 4

Adjustments ensure that liabilities are reported as all amounts ______ at the end of the accounting period.
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Adjustments ensure that liabilities are reported as all amounts ______ at the end of the accounting period.
owed
Adjusting entries are made at the _________ of the accounting period, while daily transactions are made throughout the accounting period
end
Adjusting entries are required to ______.
adjust the unadjusted balances to the desired balances
What is a good starting point for determining which accounts require adjustment?
unadjusted trail balance sheet
Which of the following account balances will typically be reduced as a result of adjusting entries?
Supplies
Deferred Revenue
Prepaid Rent
Why are adjustments needed at the end of an accounting period?
To ensure revenues and expenses are reported in the proper period
Supplies are recorded as a(n) ______ when purchased.
asset
How does the timing of adjusting entries differ from the accounting for daily transactions?
Adjustments are made at the end of the accounting period because making them on a daily basis would be inefficient.
Place the steps taken at the end of the accounting period to complete the financial statement preparation process in the correct order.
prepare the adjusted entries, prepared the adjusted trial balance, prepare the financial statement
To determine the adjusting entries required, a(n) ______ is prepared.
unadjusted trial balance
In its 1st year of business, Eel Electric purchased $1,000 of supplies on account. During the year, it paid $700 of the amount it owed for supplies. At the end of the year, it had $200 of supplies remaining. What is Supplies Expense on the income statement equal?800 Reason: It had $1,000 of supplies and only $200 left at the end of the year, it must have used $800 of its supplies during the year. At the end of the year, it recorded an adjusting entry that debited Supplies Expense (+E,-SE) and credited Supplies (-A) for $800.Which account will need an adjusting entry to adjust for the amounts used during the period that were paid for in advance?prepaid rentSupplies should be ______ and Supplies Expense should be ______ for supplies used during the period.decreased; increasedThe adjustment for supplies used during the period will result in a(n) ______ to the Supplies Expense account.increaseWhich of the following account balances will typically be increased as a result of adjusting entries?Interest Payable Supplies ExpenseAfter the adjustments have been completed, the adjusted balance in the Supplies Expense account represents the cost of supplies ______.used during the accounting perioIn its 1st year of business, Daily Grind, Inc. purchased $1,000 of supplies of which it only has $300 left at the end of the period. Which of the following will be found in the year-end financial statements?Supplies on the balance sheet of $300 Supplies Expense on the income statement of $700Which of the following statements is correct?Financial statements are prepared after adjustments to ensure that all accounts have been brought to their correct balance.The adjusting entry for supplies used during the period requires a __________ (debit or credit) to Supplies and a ________(debit or credit) to Supplies expensecredit, debitPrepaid expenses, such as Prepaid Rent, should be ______ by the benefits that were used up during the accounting period.decreaseWhen should supplies be recorded as an expense?In the period the supplies are used, regardless of when they were purchasedHow does the adjusting entry to record the supplies used during the period affect the financial statements?Supplies on the balance sheet will decrease Supplies Expense on the income statement will increase Net Income on the income statement will decreaseOn June 30, Daily Kneads paid $12,000 in advance for one year of insurance coverage beginning July 1. Match each line item with the correct amount that would be reported in the following month, July, and on which July financial statement the line item would be reported.Insurance Expense matches $1,000 on the income statement $1,000 on the income statement Prepaid Insurance , $11,000 on the balance sheet $11,000 on the balance sheetAfter the adjustments have been recorded, the adjusted balance in the Prepaid Rent account represents the ______.amount of the prepayment that remains towards future rental periodsWhich of the following accounts found on an unadjusted balance typically require adjusting entries?Prepaid Rent Supplies Interest PayableWhich action will be taken in the adjusting entry to record rent expense that has expired during the month?Debit Rent ExpenseOn November 1, Lawn & Order, Inc. paid $24,000 for two years of rent in advance for rent beginning on November 1. How much should be expensed for the month of November?1000A prepayment that is originally recorded as an asset will be ______.allocated to future accounting periods based on the value of the benefit used during the periodHow does the adjustment for depreciation differ from other deferral adjustments?The depreciation adjustment uses a contra-account rather than reducing the asset accounts directly.What are the effects on the accounting equation from the adjustment for depreciation?Total assets will decrease and total stockholders' equity will decrease.Bristol, Inc. paid $800 for a 4-month insurance policy on August 1 of the current year. On August 31, Bristol, Inc. made an adjusting entry to account for the insurance that expired during the month of August. The adjusting entry contained a debit to Insurance Expense in the amount of ______ and a credit to Prepaid Insurance in the amount of ______ The remaining balance in the Prepaid Insurance account after the adjustment was $________200,200,600Match each financial statement line item with the appropriate description.Supplies Expense---- Amount used and reported on the income statement. Supplies------Amount remaining and reported on the balance sheet. Accounts Payable---Amount owed for supplies purchased on account.The adjusting entry to record the revenue earned by the seller fulfilling its obligation results in a ___________ to the Deferred Revenue accountdecreaseWhich of the following is true about the adjusting entry to record the revenue for which the seller has performed of its obligations but not yet collected?stockholders' equity will increase assets will increaseThe adjusting entry to record depreciation on equipment includes a ______.debit to Depreciation Expense credit to Accumulated DepreciationAs of December 31, the unadjusted balance in Deferred Revenue contains $5,600 for unredeemed gift cards. An analysis of the monthly sales indicates that $3,200 gift cards were redeemed during the month but not yet recorded. How will these transactions affect the adjustments at the end of the period?Deferred Revenue needs to be decreased by the amount of gift cards redeemed during the month. Sales Revenue needs to be increased by the amount of gift cards redeemed during the month.Which of the following adjusting entries will cause assets and stockholders' equity to increase? Adjusting for services provided ______.but not yet collectedWhich of the following transactions constitutes an accrual adjustment involving a revenue account?Interest Revenue on a note receivableAs of December 31, the end of the accounting period, $700 of salaries and wages owed to employees have been incurred but not paid. The employees will be paid on January 5. On December 31, Salaries and Wages________ will be debited and Salaries and Wages ________will be credited by $700expenses, payableThe adjusting entry to record interest owed on obligations at the end of the accounting period includes a debit to ______.Interest Expense and credit to Interest PayableThe adjusting entry to record wages incurred but not yet recorded includes a credit to ______.Wages PayableThe seller's adjusting entry to record the revenue earned by fulfilling its obligation to its buyers which had been collected in advance requires a _______ (debit/credit) to Deferred Revenue and a _________(debit/credit) to Sales Revenue.debit, creditAs of December 31, $2,500 of interest expense has accrued on a $50,000 note payable. The note payable and the accrued interest will become due and payable next year. How will the interest affect the adjustments at the end of the period?Interest Expense should be increased, because the cost of interest relates to the current period.Without_______ entries, financial statements would present an incomplete and misleading picture of the company's financial position.adjustingThe step in the accounting cycle where entries are recorded to update retained earnings and zero out temporary accounts is referred to as the __________________ process.closingWhy are the adjustments important to the preparation of the financial statements?Unadjusted financial statements could present a misleading and incomplete picture of the company's financial results. Adjustments ensure the revenues the seller has performed of its obligation and expenses incurred are reflected in the income statement. Adjustments ensure that the balance sheet reports all of the economic resources the company owns and all of the obligations the company owes.