Exam 3: Measuring Business Income: The Adjusting Process

Sabrina's Fabric Land bought $5,000 of equipment at the beginning of 2019. Amortization expense on the 2019 income statement is $400. What is the balance in accumulated amortization on December 31, 2019?

Prepaid rent shows a beginning balance of $3,600 and an ending balance of $2,900. The income statement for the current period reports rent expense of $3,200. What was the amount of rent purchased during the year?

Which of the following accounts would be used under the accrual basis of accounting, but not under the cash-basis of accounting?

The cost of a property, plant, and equipment asset less its accumulated amortization is referred to as historical cost.

Financial statements are prepared from:

The matching objective directs accountants as to when to record expenses on the income statement to be matched against liabilities on the balance sheet.

Given the following adjustment data, state whether the resulting adjustment will be a deferral or an accrual -Recorded salaries earned by employees at end of month, payment to be made early next month.

Compute the amounts indicated for each of the following independent situations. Situation Beginning prepaid insurance balance ? \ 1,300 \ 600 \ 3,300 Cash payments for insurance during the year \ 2,500 ? \ 4,300 \ 2,600 Ending prepaid insurance balance \ 1,400 \ 4,250 ? \ 600 Insurance expense on the income statement \ 2,600 \ 1,700 \ 1,150 ?

On December 21, 2019, Mr. Bagger received and deposited $790 from a customer, Mrs. McCartney, who paid in advance of the work. He recorded the receipt by crediting a revenue account, Computer Service Fees Earned. As of December 31, none of the work had been completed. What, if any, is the required adjusting journal entry on December 31?

The concept that assists accountants in determining when to recognize revenue in the accounts is the:

The balance in prepaid rent after adjustment represents:

Under the cash basis of accounting, the receipt of cash from a customer in advance of performing the service would be credited to a(n):

Companies reporting under IFRS and ASPE go through the same adjusting process. What is the most significant difference between IFRS and ASPE in the terms used in the amortization journal entries?

Given the following adjustment data, state whether the resulting adjustment will be a deferral or an accrual -Estimated current month's utilities bill and recorded the amount. The bill is to be received and paid next month.

Given the following adjustment data, state whether the resulting adjustment will be a deferral or an accrual -Supplies were used during the month.

Lynnwood Services prepaid 24 months of rent in advance on October 1, 2019. Lynnwood Services debited rent expense for the entire amount of $12,000. The adjusting entry on December 31, 2019, would include a:

The matching objective directs accountants to measure expenses.

The heading of the income statement includes in the proper order:

The steps in the accounting cycle (excluding the preparation of the worksheet)are listed below in random order. List the steps in the proper sequence, inserting the number 1 to 11. a) Prepare a post-closing trial balance $\underline{\quad\quad}$ b) Prepare an adjusted trial balance $\underline{\quad\quad}$ c) Analyse transactions as they occur $\underline{\quad\quad}$ d) Prepare an unadjusted trial balance $\underline{\quad\quad}$ e) Compute the adjusted balance in each of the ledger accounts $\underline{\quad\quad}$ f) Post the journal entries to the ledger accounts $\underline{\quad\quad}$ g) Joumalize and post the adjusting journal entries $\underline{\quad\quad}$ h) Joumalize and post the closing entries $\underline{\quad\quad}$ i) Prepare financial statements $\underline{\quad\quad}$ j) Compute the unadjusted balance in each of the ledger accounts $\underline{\quad\quad}$ k) Journalize the transactions $\underline{\quad\quad}$

The recognition criteria for revenues tell accountants when to record revenue by making a journal entry and the amount of revenue to record.