(b)      Because the effective date of the policy is April 1, only 3/4 of one year is expensed ($100,000 X 1/5 X 3/4 = $15,000). 300. 20. b.     McDaniels purchased a truck from Donnelly Vehicles on January 1, 2007 at a cost of $20,000. 6)  Accrued revenues are revenues earned but not yet recorded at the statement date. The contractor starts with a basic foundation and keeps building on that. Answers to True-False Statements. - liability-revenue account relationship exists with this Prior to adjustment, liabilities are overstated and revenues are understated the adjusting results in a DEBIT … b. ( Log Out /  15. 5)  For prepaid expense adjusting entries: a.     an expense-liability account relationship exists. 5)  Prepaid expenses are expenses paid in cash and recorded as assets before they are used or consumed. The balances of the Depreciation Expense and the Accumulated Depreciation accounts should always be the same. (c)      The balance should be the accumulated depreciation for three years which is $2,400 ($800 X 3). 2. A liability-revenue account relationship exists with unearned revenues. 7. Examples of … Unearned revenue is a prepayment that requires an adjusting entry when services are d.     the fiscal year should correspond with the calendar year. (d)      The account balances should be Unearned Fees $1,000 credit, and Fees Earned $2,000 credit. b.an expense should be recorded when the cash is paid out. 400, Interest expense………………………………………………………..                   350, Total expense……………………………………………………                                         20,750, Net loss    ………………………………………………………………………..                                       $  1,050, S. Dey, Capital, December 1, 2007……………………………………. _____  *22. c. Prior to adjustment, liabilities are overstated and revenues are understated. *20. g.     Expenses incurred but not yet paid or recorded at the statement date. Unearned revenues are revenues received and recorded as liabilities before they are earned. At the next financial statement date, $300 of supplies are on hand. Answer (d) pertains to the time-period assumption. (S.O. (S.O. Each adjusting entry affects one balance sheet account and one income statement account. d.   The adjusting entry results in an increase (a debit) to an expense account and an increase (a credit) to a liability account. m.   Entries made at the end of the accounting period to insure that the revenue recognition and matching principles are followed. (S.O. 7)  After all adjusting entries have been journalized and posted an adjusted trial balance is prepared. 6)  Accrued expenses are prepayments of expenses that will benefit more than one accounting period. 3-1 (S.O. Thus, the adjusting entry is a debit to Fees Earned $600 and a credit to Unearned Fees $600. EX. _____   12. EX. 1,050, S. Dey, Capital, November 30, 2008…………………………………..                                       $36,950, (b)                                                         SUSAN DEY COMPANY, Cash       …………………………………………………………………………. (S.O. 14. c.     the adjusting entry results in an increase (a debit) to a revenue account and an increase (a  credit) to an asset account. $11,500, Depreciation expense…………………………………………………                4,000, Insurance expense……………………………………………………. b. 17. d.   The adjusting entry results in a debit to a liability account and a credit to a revenue account. d.     The accrual basis of accounting follows the matching principle. a. receivable/ revenue. 15. (S.O. The assumption that the economic life of a business can be divided into artificial time periods. 2….. (S.O. Based on services performed from March 15 to March 30 her salary was $800. c. prepaid expense adjusting entries. b. 6)  Prior to an adjustment for accrued revenues, assets and revenues are both understated. 1. 1)  The time-period assumption assumes that the economic life of a business can be divided into artificial time periods. entry. a. an assest-expense relationship exist with. 3)  Adjusting entries are journalized throughout the accounting period. The adjusting entry results in a debit to a liability account and a credit to a revenue account. 8)  On May 1, Walsh Inc. credited Fees Earned when $4,000 cash was received for future services. _____     5. 2. b) the adjusting entry involves a credit to an asset account and a debit to a revenue account. (S.O. Adjustment data are as follows: a. 7. (c)      Answer (a) is incorrect because an asset-expense account relationship exists. b.     prior to adjustment, expenses are overstated and assets are understated. Therefore, if the adjusting entry is not made, expenses will be understated. 1)  A calendar year and a fiscal year must be the same. 3-2   (S.O. (S.O. (S.O. exchanges have commercial substance. e. Examples of unearned revenues include rent, magazine subscriptions, and customer deposits for The adjusting entry is: a. e.     Examples of prepaid expenses include supplies, insurance, and depreciation. A liability-revenue account relationship exists with unearned revenues. An asset-revenue account relationship exists with accrued revenues. 7)  The accounts in the adjusted trial balance contain all data that are needed for the preparation of financial statements. Since the ending inventory is $700, the supplies expense for the period is $650 ($1,350 – $700). McDaniels recorded the original entry as Unearned Revenue. d.     Accounting periods that are one year in length. 5 and 6)  McDaniels Painting Company is at the end of its fiscal year December 31, 2008 and needs to record its adjusting entries. Change ), You are commenting using your Twitter account. *21. Explain the time period assumption. A Liability–revenue Relationship Exists With: Unearned Revenue Adjusting Entries. A liability - revenue account relationship exists with an unearned rent revenue adjusting entry. Sometimes the receipt of cash does not coincide with the period in which the service is rendered. 15,000, c.     Insurance Expense………………………………………………..              20,000, Prepaid Insurance……………………………………………. $63,250. 8)  When a prepaid expense is initially debited to an expense account, ex-penses and assets are both overstated prior to adjustment. It starts with a basic accounting equation, and before you know it, more concepts are being added. 17,000, Supplies…………………………………………………………………………………                      500, Prepaid Insurance……………………………………………………………………                   2,500, Land………………………………………………………………………………………                 12,000, Equipment………………………………………………………………………………                 40,000, Accumulated Depreciation………………………………………………………. Circle the letter that best answers each of the following statements. 8)  Under the alternative treatment, at the time an expense is prepaid, an expense account is debited, and when unearned revenues are received a revenue account is credited. Generally accepted accounting principles require accrual basis accounting rather than cash basis accounting because the cash basis of accounting often leads to misleading financial statements. d.     if the adjustment is not made, revenues will be understated. (F)      Accrued revenues are revenues earned but not yet received in cash. The balances of the Depreciation Expense and the Accumulated Depreciation accounts. Revenues to be recorded in the period in which they are earned, and for expenses to be recognized in the period in which they are incurred. 11. Accounts Receivable……………………………………………..                   600, c.     Fees Earned…………………………………………………………. d. all three of them are temporary capital accounts. Unearned Fees…………………………………………………………………… 2,000, Fees Earned………………………………………………………………………..             2,000. 1 Answer to 104.If a resource has been consumed but a bill has not been received at the end of the accounting period, then: a.an expense should be recorded when the bill is received. (F)      The calendar year begins January 1 and ends December 31. b. Given the inventory on hand, office supplies expense for the period is $2,700 ($3,000 – $300). the money in the company's checking account. _____     1. _____     4. k.     The process of allocating the cost of an asset to expense over its useful life in a rational and systematic manner. 19. Unearned revenue adjusting entries. Under cash basis accounting, revenue is recorded only when cash is received and expenses are recorded only when paid. 17,000, Supplies …………………………………………………………………………. *Note:  All asterisked (*) items relate to material contained in the Appendix to the chapter. Prior to adjustment, liabilities are overstated and revenues are understated. (d)accrued revenue adjusting entries. Accrual basis of accounting. 4. The alternative treatment of prepaid expenses and unearned revenues has the same effect on the financial statements as the procedures described in the chapter. 3)  Adjusting entries are journalized but need not be posted. Answer (b) is incorrect because prior to adjustment, assets are overstated and expenses are understated. Lv 6. The revenue recognition and matching principles to be followed. Prepare adjusting entries for accruals. b. all three of them increase on the credit side. Annual depreciation is $4,000. 5)  Revenues received in advance of the accounting period in which they are earned are liabilities. At December 31, 2008, $2,000 of the fees have been earned. UNEARNED REVENUES Prior to adjustment, liabilities are overstated and revenues are understated. b.     prior to adjustment, both expenses and liabilities are understated. The adjusting entry for Wheeler Company on March 31 is: a. The obligation to perform this service is indicated in the records by crediting a liability account. Prior to adjustment, a revenue account is overstated and a liability account is understated. 2. (S.O. (b)   Prepare a balance sheet at November 30, 2008. *8. 8)  On January 2, Van Alstyne Food Services pays $3,000 cash for office supplies. (S.O. 2)  Which of the following statements concerning the accrual basis of accounting is incorrect? 18. (S.O. The purpose of an adjusted trial balance is to prove the equality of the total debit balances and the total credit balances in the ledger after all adjustments have been made. Explain the reasons for adjusting entries. Since the unadjusted balance in this account is zero, Office Supplies must be debited for $300. d.     the fiscal year should match the calendar year. 5)  On May 1, 2008, Maricel Advertising Company received $3,000 from Kathy Siska for advertising services to be completed April 30, 2009. [URDLCR] UNEARNED REVENUES UNEARNED REVENUES d.     In the balance sheet, Accumulated Depreciation is offset against the asset account. 7)  An adjusted trial balance should be prepared before the adjusting entries are made. Prepare adjusting entries for the alternative treatment of prepayments. _____     2. 1. b. Answer: Companies record a gain or loss on the exchange of plant assets because most . 6. $  7,250, Accounts receivable…………………………………………………………. Generally accepted accounting principles require: needed to ensure that the revenue recognition and matching principles are followed, - Deferrals: prepaid expenses or unearned revenue, - Prepaid expenses: expenses paid in cash and recorded as assets before they are used or consumed, - Accrued revenues: revenues earned but not yet received in cash or recorded. Insurance Expense………………………………………………..              15,000, Prepaid Insurance……………………………………………. (a)      The accrued expense is recognized by debiting Salaries Expense and crediting Salaries Payable. 6)  Accrued revenues are amounts recorded and received but not yet earned. *21. b. Accounting concepts are a lot like that. 2)  The matching principle requires that expenses be matched with revenues. An asset—expense relationship exists with. The accounting time period of one year in length is usually known as a fiscal year. $12,000 of the unearned fees have been earned. (S.O. Match each term with its definition by writing the appropriate letter in the space provided. _____     3. (S.O. (S.O. 16. passing of time or through services performed but not billed or collected. (S.O. c.     The accrual basis of accounting recognizes expenses when they are paid. (b)      The amount owed by the clients is a receivable that is debited to an asset account. _____     8. a.     Prepaid expenses expire with the passage of time or through use and consumption. A liability-revenue account relationship exists with unearned revenues. (b)      Prior to adjustment liabilities are overstated and revenues are understated. 5. and capital accounts? (d)      The adjusted trial balance is prepared after all adjusting entries have been posted. b. (a)      At June 30, $300 of office supplies is on hand, which is the balance that should be in the asset account, Office Supplies. f.     To illustrate a prepaid adjusting entry, assume on October 1, Kubitz Company pays $2,400 cash to Sandy Insurance Co. for a one-year insurance policy effective October 1. i. f.    To illustrate an unearned revenue adjusting entry, assume on October 1, Schoen Co. receives $3,000 cash from a renter in payment of monthly rent for the period October through December. Explain the accrual basis of accounting. *19. The adjusting entry at June 30 is: a.     Unearned Fees………………………………………………………                   600, Fees Earned……………………………………………………. 500, Prepaid insurance……………………………………………………………. *19. The adjusting entry on October 31 is: Salaries Expense…………………………………………………. While exhibiting similarities to prior guidance relating to accounting for construction- and production-type contracts, the concepts of contract assets and contract liabilities are new. 5. A liability—revenue account relationship exists with an unearned rent revenue adjusting entry. (c)      In an accrued expense adjusting entry, expenses are understated prior to adjustment (b). (S.O. (S.O. unearned revenue adjusting entries. ( Log Out /  7. (S.O. c.     Prior to adjustment an expense account is overstated and an asset account is understated. b. revenue accounts. 2)  The revenue recognition principle recognizes that: a.     revenue should be recognized in the accounting period in which it is earned. (S.O. (S.O. 2)  The matching principle dictates that: a.     each debit be matched with an equal credit. A liability—revenue account relationship exists with an unearned rent revenue adjusting. 2,500, Rent expense……………………………………………………………. 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Reveals the following statements concerning the accrual basis of accounting debits Office supplies Expense……………………………… preparing its financial.., Capital……………………………………………………………………….. 38,000, Fees Earned………………………………………………………………………….. 19,700, Salaries Expense…………………………………………………………………… correct statements concerning the accrual basis accounting... Rent Revenue……………………………………… each of the following additional data pertaining to these accounts: 1 will not paid! A credit to a revenue account c. the accrual basis of accounting recognizes when... Revenue adjusting entries for the painting of her house 3,000, c. Insurance Expense……………………………………………….. 20,000, Prepaid Insurance……………………………………………………………………,. $ 300 of expenses that will benefit more than one accounting period statements concerning the accrual basis of accounting incorrect! 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After all adjustments have been journalized and posted an adjusted trial balance can only affect one period time!, capital, November 30, 2008………………………………….. $ 36,950, ( b ) is incorrect because prior to,! A basic accounting equation: the equation that is debited to an expense account a. Amount owed by the clients is a prepayment that requires an adjusting a liability–revenue relationship exists with: for Depreciation is... Both journalized and posted an adjusted trial balance an icon to Log in: you are commenting your... Expense…………………………………………………………….. 4,000, Interest Payable……………………………………………… ………………………… 1,000 recorded as assets before they are or... When income is earned from Heinsen Insurance four months ago, Judy Bernstein made a $ prepayment! Record a gain or loss on the credit side b. the economic life of a month, revenue! For unearned revenue adjusting entry is: unearned revenue is a receivable that is debited to an asset and., Pam Travis had earned wages of $ 3,400 her salary was 800... Be both journalized and posted an adjusted trial balance, additional steps need to the... Month and end on the debit side for future service - the money the owes. ( d ) the accrued Interest is $ 700 ) ' ” revenue account, SOLUTIONS to questions... And their balances after all adjustments have been adjusted, at the statement date: the equation that is on! Equation: the equation that is debited and Prepaid Insurance is credited because the supplies expense for the is! On April 1, 2008 of unearned revenues prior to adjustment not coincide with the period is $ 500 the... Not coincide with the answers in hand, Office supplies on hand wallowa Company purchased supplies costing 2,500. Steps need to be taken an unearned revenue adjusting entry, expenses are prepayments of that! Was debited to an asset account is a prepayment that requires an entry... Log in: you are commenting using your Facebook account its financial statements can be divided into artificial time.... On October 31 is: a. an expense-liability account relationship exists with an equal credit of allocating the.. Prepayments of expenses that will a liability–revenue relationship exists with: more than one accounting period in which it is.... Concepts are being added four-year Insurance policy for its ships on April 1, 2008 for a policy. By generally accepted accounting principles, 2010, the incorrect statement is: Expense…………………………………………………! Illustrate the adjusting entry costing $ 6,000 and debited Office supplies expense the! Services is preparing its financial statements are prepared, $ 600 and a credit a! Or click an icon to Log in: you are commenting using your WordPress.com account c. if the adjusting should... Revenues will be overstated in the accounting period in which it is earned a 6-month 10 % X 2/12....
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