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Adjusting entries are usually entered in the work sheet before they are entered in the general journal.

A) True
B) False

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The accrual basis of accounting reflects the principle that revenue is recorded when it is earned,not when cash is received.

A) True
B) False

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The main purpose of adjusting entries is to:


A) Record external transactions and events.
B) Record internal transactions and events.
C) Recognize assets purchased during the period.
D) Recognize debts paid during the period.
E) Correct errors in the accounting records.

F) D) and E)
G) All of the above

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An adjusting entry was made on year-end December 31 to accrue salary expense of $1,200.Assuming the company does not prepare reversing entries,which of the following entries would be prepared to record the $3,000 payment of salaries in January of the following year?


A)  Salaries Expense 3,000 Cash 3,000\begin{array} { | l | r | r | } \hline \text { Salaries Expense } & 3,000 & \\\hline \text { Cash } & & 3,000 \\\hline\end{array}
B)  Salaries Payable 3,000 Cash 3,000\begin{array} { | l | r | r | } \hline \text { Salaries Payable } & 3,000 & \\\hline \text { Cash } & & 3,000 \\\hline\end{array}
C)  Salaries Payable 1,200 Cash 1,200\begin{array} { | l | r | r | } \hline \text { Salaries Payable } & 1,200 & \\\hline \text { Cash } & & 1,200 \\\hline\end{array}
D)  Salaries Expense 1,200 Salaries Payable 1,200\begin{array} { | l | r | r | } \hline \text { Salaries Expense } & 1,200 & \\\hline \text { Salaries Payable } & & 1,200 \\\hline\end{array}
E)  Salaries Payable 1,200 Salaries Expense 1,800 Cash 3,000\begin{array} { | l | r | r | } \hline \text { Salaries Payable } & 1,200 & \\\hline \text { Salaries Expense } & 1,800 & \\\hline \text { Cash } & & 3,000 \\\hline\end{array}

F) C) and E)
G) A) and D)

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For each of the following two separate situations,present both the April 30 adjusting entry and the subsequent entry during May to record the payment of the accrued expenses or receipt of the accrued revenue.Assume the company does not prepare reversing entries. a.Nicolas Company has 5 employees,who earn a total of $2,900 in salaries each working day.They are paid on Monday for the five-day workweek ending on the previous Friday.Assume that fiscal year ended April 30,is a Thursday and all employees worked each day and will be paid salaries for five full days on the following Monday. b.Services of $3,000 have been performed for Clevenger Company through April 30.The client will pay the entire amount of the contract when services are completed on May 23. c.Paid the employees' salaries on May 4. d.Received payment from Clevenger Company for services that are now completed on May 23.

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On December 1,Simpson Marketing Company received $3,600 from a customer for a 2-month marketing plan to be completed January 31 of the following year.The cash receipt was recorded as unearned fees.The adjusting entry for the year ended December 31 would include:


A) a debit to Earned Fees for $3,600.
B) a debit to Unearned Fees for $1,800.
C) a credit to Unearned Fees for $1,800.
D) a debit to Earned Fees for $1,800.
E) a credit to Earned Fees for $3,600.

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

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A salary owed to employees is an example of an accrued expense.

A) True
B) False

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Interim financial statements refer to financial reports:


A) That cover less than one year, usually spanning one, three, or six-month periods.
B) That are prepared before any adjustments have been recorded.
C) That show the assets above the liabilities and the liabilities above the equity.
D) Where revenues are reported on the income statement when cash is received and expenses are reported when cash is paid.
E) Where the adjustment process is used to assign revenues to the periods in which they are earned and to match expenses with revenues.

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

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Match the following terms with the appropriate definition. -A balance sheet that lists items vertically in the order of assets,liabilities and equity.


A) Adjusting entry
B) Unadjusted trial balance
C) Prepaid expenses
D) Natural business year
E) Accrued expenses
F) Adjusted trial balance
G) Report form balance sheet
H) Accounting period
I) Profit margin
J) Contra account

K) A) and I)
L) B) and F)

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Torsten had total assets of $149,501,000,net income of $6,242,000,and net sales of $209,203,000.Its profit margin was 2.98%.

A) True
B) False

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Match the following terms with the appropriate definition. -A set of financial statements that covers less than one year,typically one,three,or six months of activity.


A) Accrued revenues
B) Expense recognition (matching) principle
C) Cash basis accounting
D) Depreciation
E) Accrual basis accounting
F) Interim financial statements
G) Straight-line depreciation
H) Time period assumption
I) Fiscal year

J) F) and G)
K) A) and G)

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If a company plans to continue business into the future,closing entries are not required.

A) True
B) False

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Describe the two alternate methods used to account for prepaid expenses.

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The first method places all prepaid expe...

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The following unadjusted and adjusted trial balances are from the current year's accounting system for Excelsior. The following unadjusted and adjusted trial balances are from the current year's accounting system for Excelsior. Present the six adjusting entries in general journal form that explain the changes in the account balances from the unadjusted to the adjusted trial balance. Present the six adjusting entries in general journal form that explain the changes in the account balances from the unadjusted to the adjusted trial balance.

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Which of the following statements is incorrect?


A) An income statement reports revenues earned less expenses incurred.
B) An unadjusted trial balance shows the account balances after they have been revised to reflect the effects of end-of-period adjustments.
C) Interim financial reports can be based on one-month or three-month accounting periods.
D) The fiscal year is any 12 consecutive months (or 52 weeks) used by a business as its annual accounting period.
E) Property, plant, and equipment are referred to as plant assets.

F) C) and D)
G) B) and C)

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________ is the process of allocating the cost of plant assets to the income statement over their expected useful lives.

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Match the following types of adjustments with the appropriate transactions. -Unearned revenue


A) Used to record wages owed, but not yet paid.
B) Used to record revenue earned for which cash was received in advance.
C) Used to record revenue earned for which cash has not been received.
D) Used to record expiration or use of prepaid insurance.

E) B) and D)
F) B) and C)

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The current ratio is computed by dividing current liabilities by current assets.

A) True
B) False

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The entry to record a cash receipt from a customer when the service is to be provided in a future period involves a debit to an unearned revenue account.

A) True
B) False

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The current ratio is used to help assess a company's ability to pay its debts in the near future.

A) True
B) False

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