Exam 3: Adjusting Accounts for Financial Statements

The accrual basis of accounting

On December 31, 2020, the accountant for a proprietorship forgot to record $7,000 of depreciation on office equipment. In the 2020 financial statements, what is the effect of this error on assets, profit, and equity?

The broad principle that requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses is the

In reviewing the accounts of Tumblers Co., you discovered that a credit of $1,000 to prepaid insurance was wrongly credited to accounts receivable, and an $800 prepayment was remitted for a radio advertisement that was not posted. Which of the following statements reflects the effect of the errors?

If the accountant failed to make the end-of-period adjustment to reduce the Unearned Management Revenue account by the amount of management revenue earned, the omission would cause

In accrual basis accounting, accrued revenues are recorded as liabilities.

The accounting basis that attempts to measure performance in the period in which it occurred is the

Throughout an accounting period, the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Service Revenue. If the accountant fails to make the end-of-period adjusting entry to record the portion of these fees that has been earned, one effect will be

At year-end, the accountant for D. Yee Chiropractic Service noted the following errors in the trial balance: The bookkeeper understated the total credits to the Accourts Payable account by $\$ 500$ when calculating the account balance. A cash sale for $\$ 300$ was recorded as a credit to the unearned reverue account, but the servicehad been provided to the customer at the time of the cash exchange. A cash receipt from a customer for $\$ 2,600$ was never recorded. The $\$ 1,000$ balance of the Prepaid Rent account was listed in the credit colurm of the trial balance. A $\$ 25,000$ car purchase was recorded as a $\$ 20,500$ debit to Vehicles and a $\$ 20,500$ credit to Notes Payable. A purchase of office supplies for $\$ 150$ was recorded as a debit to Supplies Expense. The off setting credit entry was correct. An additional investrnent of $\$ 4,000$ by D. Yee chiropractic Was recorded as a debit to D. Yee, Capital and as a credit to Cash. The payment of the $\$ 510$ utility bill for Decermber was recorded twice. The reverue account balarnce of $\$ 79,000$ was listed on the trial balance as $\$ 97,000$ . A $\$ 1,000$ withdrawal made by the owner was recorded to the correct accounts as $\$ 100$ . Using the form below, indicate if each error would cause the trial balance to be out of balance, the amount of any imbalance, and if a correcting entry is required.

Accrued expenses at the end of one period result in cash payments in a subsequent period.

The partial unadjusted trial balance of Erif Corporation at December 31, 2020 follows. All accounts have normal balances. The following additional information is available at the December 31, 2020 year end: a. Insurance expense represents a 3-year insurance policy for the period from January 1, 2020 to December 31, 2022. b. A count of office supplies reveals that at December 31, 2020, the company had $500 of office supplies on hand. c. The company's lease, signed on January 1, 2020, specifies monthly rent of $4,000, or $48,000 a year. d. The December 2020 utility bill has not yet been received and is not included in the trial balance. The utility bill averages $400 a month. Required - Using the information above, find the balances in the following account balances, after adjustment, at December 31, 2020: -Utilities Expense

The Surrey Service Company issued financial statements for last year but failed to include the following adjusting entries:(A) Accrued service revenues earned of $2,300. (B) Depreciation expense of $5,000. (C) Office supplies used, $2,100. (D) Accrued salaries of $3,400. (E) Revenues of $4,600, originally recorded as unearned, but earned by the end of the year. Determine the correct amounts for last year's financial statements by completing the following schedule:

For the current year, the profit of Alpha and Omega was incorrectly calculated as $547,715 for the year ended December 31. You are called in as the accountant to determine the correct profit. After examination of the accounts, you find the following errors: Calculate the correct profit for this year.

A balance sheet that places the assets above the liabilities and equity is called a(n)

The entry to record a cash receipt from a customer when the service to be provided to earn the cash has not yet been performed involves a debit to an unearned revenue account.

To correct the error in debiting a truck purchase to Trucking Expense.

The adjusting entry to record the earned but unpaid salaries of employees at the end of the accounting period is

Before making adjusting entries at the end of an accounting period, some accounts may not show proper financial statement amounts even though all transactions were correctly recorded.

At June 30, supplies on hand were shown to be $350. What amount should be expensed to the income statement for June? Make the needed adjusting entry.

The timeliness principle assumes that an organization's activities can be divided into specific time periods including