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Exam 3: The Adjusting Process

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Question 61

Multiple Choice

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Using accrual accounting, revenue is recorded and reported only

A) when cash is received without regard to when the services are rendered
B) when the services are rendered without regard to when cash is received
C) when cash is received at the time services are rendered
D) if cash is received after the services are rendered

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

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Question 62

True/False

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The financial statements measure precisely the financial condition and results of operations of a business.

A) True
B) False

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Question 63

Multiple Choice

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Which of the following is considered to be an accrued expense?

An example of deferred revenue is Unearned Rent.

The balance in the unearned fees account, before adjustment at the end of the year, is $10,250. Journalize the adjusting entry required if the amount of unearned fees at the end of the year is $3,125.

Under the accrual basis, some accounts in the ledger require updating. Discuss the three main reasons for this updating and give an example of each.

Fees receivable would appear on the balance sheet as a(n)

The account type and normal balance of Prepaid Expense is

The general term used to indicate delaying the recognition of an expense already paid or of a revenue already received is

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.

Adjustments for accruals are needed to record a revenue that has been earned or an expense that has been incurred but not recorded.

As time passes, fixed assets other than land lose their capacity to provide useful services. To account for this decrease in usefulness, the cost of fixed assets is systematically allocated to expense through a process called

If the adjustment for depreciation for the year is inadvertently omitted, the assets on the balance sheet at the end of the period will be understated.

On December 31, the balance in the Office Supplies account is $1,385. A count shows $435 worth of supplies on hand. Prepare the adjusting entry for supplies.

Deferrals are recorded transactions that delay the recognition of an expense or revenue.

Accrued revenues would appear on the balance sheet as

Which of the following is an example of a prepaid expense?

One of the accounting concepts upon which deferrals and accruals are based is

For the year ending December 31, Orion, Inc. 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. For the year ending December 31, what is the effect of these errors on revenues, expenses, and net income?

The general term employed to indicate an expense that has not been paid and has not yet been recognized in the accounts by a routine entry is