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Exam 3: The Adjusting Process

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Question 51

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The financial statements are prepared from the unadjusted trial balance.

A) True
B) False

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Question 52

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Accumulated Depreciation accounts are liability accounts.

A) True
B) False

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Question 53

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At the end of the fiscal year, the usual adjusting entry to Prepaid Insurance to record expired insurance was omitted. Which of the following statements is true?

On January 1st, Power House Co. prepays the year's rent, $10,140 to its landlord. Prepare the journal entry by recording the prepayment to an asset account.

Two income statements for PS Enterprises are shown below: Prepare a vertical analysis of PS Enterprises' income statements. Has operating income increased or decreased as a percentage of revenue?

A company depreciates its equipment $500 a year. The adjusting entry for December 31 is debit Depreciation Expense, $500 and credit Equipment, $500.

If there is a balance in the prepaid rent account after adjusting entries are made, it represents a(n)

Classify the following items as: (1) prepaid expense, (2) unearned revenue, (3) accrued expense, or (4) accrued revenue. a) Fees received but not yet earned. b) Fees earned but not yet received. c) Paid premium on a one-year insurance policy. d) Property tax accrual

The cost of office supplies to be used in future periods is ordinarily shown on the balance sheet as a(n)

Which one of the following accounts below would likely be included in a deferral adjusting entry?

Revenue recognition concept requires that the reporting of revenue be included in the period when cash for the service is received.

The entry to adjust the accounts for wages accrued at the end of the accounting period is

Listed below are accounts to use for transactions (a) through (j), each identified by a number. Following this list are the transactions. You are to indicate for each transaction the accounts that should be debited and credited by placing the account number(s) in the appropriate box.

A fixed asset's market value is reflected in the Balance Sheet.

At the end of the fiscal year, the usual adjusting entry for depreciation on equipment was omitted. Which of the following statements is true?

Generally accepted accounting principles require accrual-basis accounting.

What is the purpose of the adjusted trial balance?

The net book value of a fixed asset is determined by

For each of the following errors, considered individually, indicate whether the error would cause the adjusted trial balance totals to be unequal. If the error would cause the adjusted trial balance total to be unequal, indicate whether the debit or credit total is higher and by how much.

At the end of April, the first month of the year, the usual adjusting entry transferring rent earned to a revenue account from the unearned rent account was omitted. Indicate which items will be incorrectly stated, because of the error, on (a) the income statement for April and (b) the balance sheet as of April 30. Also indicate whether the items in error will be overstated or understated.