Exam 3: Measuring Business Income: Adjusting the Accounts

Adjusting entries affect liquidity through their impact on assets and liabilities on the balance sheet.

All increases to stockholders' equity are from revenues.

During the performance of the steps in the accounting cycle,the trial balance and the adjusted trial balance are prepared at two key points.Using specific names where applicable,discuss the time of preparation and the purpose served by each of these trial balances.

Which of the following accounts probably would contain a smaller dollar amount on the adjusted trial balance than on the trial balance?

If a company is expected to survive,it is considered a going concern.

Which of the following is an application of accrual accounting?

Revenue should be recognized,even when collectibility is not reasonably assured.

For each of the following oversights,state whether total assets will be understated,overstated,or not affected. ______ a.Failure to record revenue earned but not yet received ______ b.Failure to record expired rent ______ c.Failure to record accrued interest in the bank ______ d.Failure to record depreciation ______ e.Failure to record accrued wages ______ f.Failure to convert unearned revenue to earned revenue

When there is no direct connection between revenues and expenses,the costs are systematically allocated among the periods benefited.

Office Supplies was $1,800 at the end of January and $2,280 at the end of February.During February,Office Supplies Expense equaled $560.How much cash was paid for office supplies during February?

Which of the following is correct regarding accrual accounting?

Use this information pertaining to Tucson Company to answer the following question. 1)The corporation's Supplies account showed a beginning debit balance of $400 and supplies purchased of $1,600.There were $600 of supplies on hand at year end. 2)Depreciation on a building is estimated to be $10,000. 3)A one-year insurance policy was purchased for $4,000.Six months have passed since the purchase. 4)Accrued interest on a note receivable amounted to $200. 5)The company received a $3,600 advance payment during the year on services to be performed.By the end of the year,one-third of the services had been performed. The adjusting entry to record the amount of service revenue earned during the accounting period is

The manipulation of revenues and expenses to achieve a specific outcome is called

Adjusting entries affect cash flows in the current period.

Which of the following accounts could not be credited in an adjusting entry?

Net income is misleading when revenue is overstated or expenses are understated by significant amounts.

For each of the following oversights,state whether stockholders' equity will be understated,overstated,or not affected. ______ a.Failure to record depreciation ______ b.Failure to record accrued wages ______ c.Failure to convert unearned revenue to earned revenue ______ d.Failure to record accrued interest in the bank ______ e.Failure to record expired insurance ______ f.Failure to record revenue earned but not yet received

In applying the matching rule,revenue recognition should come before the matching (assignment)of expense.

Which of the following transactions will not result in an increase in revenues?

Prepaid Rent was $800 at the end of May and $1,300 at the end of June.Rent Expense for June was $720.How much cash was paid for rent during June?