Exam 3: The Adjusting Process

Duncan Services records prepaid expenses as expenses when incurred, and unearned revenues as revenues when the payment is received in advance. At the end of the year, Duncan makes the necessary adjustments based on accrual basis accounting. On July 1, Duncan paid rent for an office in the amount of $24,000 for the period July 1 through June 30 of the following year. Provide the year-end adjusting entry for rent prepayment.

Which of the following accounting terms assumes that a business's activities can be divided into small segments and financial statements can be prepared for specific periods, such as a month, quarter, or year?

The accountant of Skyscrapers Architectural Services failed to make an adjusting entry to record $7,000 of depreciation expense. Which of the following statements is true?

If a company fails to make an adjusting entry for accrued revenues, the net income will be overstated.

On the first day of January, Patricia borrowed $2,000 on a one-year note payable bearing interest at 4% per year. The note specifies that principal and interest must be paid in full at the end of the one-year period. On June 30, the adjusted trial balance will show Interest Payable of:

A company received $5,000 for 100 one-year subscriptions on July 1. The journal entry to record this cash receipt would include a:

The worksheet is NOT a journal, a ledger, or a financial statement.

In accounting terms, the calendar year is always called the fiscal year.

Henry Tax Planning Service bought computer equipment for $24,000 on January 1, 2014. It has an estimated useful life of 4 years and zero residual value. Henry uses the straight-line method to calculate depreciation and records depreciation expense in the books at the end of every month. Calculate the amount of Depreciation Expense for the period, January 1, 2014 through September 30, 2014, for this equipment.

On January 1, Smith had a beginning balance in Unearned Revenue of $2,000. During January, he earned $1,000 of the unearned revenue. He also collected $6,000 from a new customer for services to be rendered the following month. At the end of January, the Unearned Revenue account had a balance of $6,000.

Deborah Consultants had the following balances before passing adjusting entries in the books on December 31, 2015. Prepare the adjusted trial balance after considering these adjustments: a. Office Supplies used, $800. Assume the office supplies were initially recorded as an asset. b. Accrued salaries on December 31, $600. c. Revenue accrued but not recorded, $200.

In the case of unearned revenue, the adjusting entry at the end of the period includes a debit to Service Revenue. Assume the unearned revenue is initially recorded as a liability.

The owner of Recipes.org purchased $2,000 of supplies on account. Under the accrual basis of accounting, no entry is made until the $2,000 is paid.

If a company is using the accrual basis accounting method, when should it record its earned revenue?

The depreciation method that allocates an equal amount of depreciation each year is called the straight-line method.

The matching principle states that:

Smith owns manufacturing equipment that was bought for $12,600. It has an estimated useful life of 7 years. Smith should record depreciation expense of $100 per month.

On December 31, 2014, the balance in Pinnacle Exploration Company's Unearned Revenue account was a credit of $8,000. In January, 2015, the company received an advance payment of $14,000 from a new customer for services to be performed. By January 31, adjustments had been made to recognize $7,000 of the revenue which had been earned during January. What was the balance in Unearned Revenue on January 31, 2015?

The employees of Robert Rogers, CPA, worked the last two weeks of December. They received their paychecks on January 2. Which of the following accounts should appear on the balance sheet as of December 31 as per the matching principle?

The following extract was taken from the worksheet of Kelly Bakers for the year 2014. For the above information, determine the amount of Depreciation Expense for the equipment used in the business.