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Exam 3: Adjusting Accounts for Financial Statements

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Question 91

Multiple Choice

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What was Grow's insurance expense for 2023?

A) $4,500
B) $17,700
C) $18,000
D) $18,300
E) $8,700

F) A) and B)
G) A) and C)

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Question 92

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The two main accounting principles used in the adjusting process are matching and full disclosure.

A) True
B) False

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Question 93

Multiple Choice

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For a prepaid expense, the adjusting entry would

Identify and explain the reasons for the order in which financial statements are prepared.

The book value of an asset is equivalent to the market value of that asset.

Which of the following accounts is most likely associated with an accrued expense?

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: -Prepaid Rent

Discuss the types of adjusting entries used for prepaid expenses, depreciation, and unearned revenues.

If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Services Revenue, the end-of-period adjusting entry to record the portion of these fees that has been earned is

The remaining balance in Prepaid Insurance on December 31, 2021 of $12,600 was for a six-month insurance policy purchased for $16,800 and in effect on July 1, 2020. What is the required adjustment amount on December 31^st?

Failure to record depreciation expense will overstate the asset and understate the expense.

On July 1, 2021, JazzE Ltd. purchased a 3-year insurance policy and paid a premium of $60,000. JazzE has a December 31 year end. Under accrual accounting, which of the following statements best describes the effect of this transaction?

Before adjusting for accrued revenues, both assets and equity are understated.

Before recording adjusting entries on December 31, the Store Supplies account had a $1,900 debit balance, while a physical count of the supplies showed $300 of unused supplies on hand. Prepare the required adjusting entry.

Accrued expenses reflect transactions where cash is paid before a related expense is recognized.

If accrued salaries were recorded on December 31 with a credit to Salaries Payable, the entry to record payment of these wages on January 5 would include

A business pays each of its two office employees each Friday at the rate of $60 per day for a five-day week that begins on Monday. If the accounting period ends on Tuesday and the employees worked on both Monday and Tuesday, the adjusting entry to record the salaries earned but unpaid is

Adjusting entries

The accrual basis of accounting is an accounting system in which revenues are reported as earned when cash is received.

Under the cash basis of accounting, no adjustments are made for prepaid, unearned, and accrued items.