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Exam 3: The Adjusting Process

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Question 41

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The revenue recognition concept

A) is not in conflict with the cash method of accounting
B) determines when revenue is credited to a revenue account
C) states that revenue is not recorded until the cash is received
D) controls all revenue reporting for the cash basis of accounting

E) B) and C)
F) A) and D)

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Question 42

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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.

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Question 43

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

What effect will this adjustment have on the accounting records?

Depreciation Expense and Accumulated Depreciation are classified, respectively, as

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?

The difference between the balance of a fixed asset account and the balance of its related accumulated depreciation account is termed the book value of the asset.

For the year ending June 30, Island Clinical Services mistakenly omitted adjusting entries for $1,500 of supplies that were used, (2) unearned revenue of $4,200 that was earned, and (3) insurance of $5,000 that expired. What is the combined effect of these errors on (a) revenues, (b) expenses, and (c) net income for the year ending June 30?

When preparing an income statement vertical analysis, each revenue and expense is expressed as a percent of net income.

Depreciation on Office Equipment is $3,300. The adjusting entry on December 31, 2011 would be

What effect will this adjusting journal entry have on the accounting records?

On April 30, a business estimates depreciation on equipment used during the first year of operations to be $2,900. (a) Journalize the adjusting entry required as of April 30. (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 April 30?

Using accrual accounting, expenses are recorded and reported only

Given the following account balances for Garry's Tree Service, prepare a trial balance.

Under accrual accounting, revenues and expenses should be recorded in the same period to which they relate.

A company pays $360 for a yearly trade magazine on August 1. The adjusting entry on December 31 is debit Unearned Subscription Revenue, $150 and credit Subscription Revenue, $150.

The following adjusting journal entry found in the journal is missing an explanation. Select the best explanation for the entry.

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

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.

Generally accepted accounting principles requires that companies use the ____ of accounting.