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36.If the adjustment to recognize expired insurance at the end of the period is inadvertently omitted, the assets at the end of the period will be understated.
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13.An adjusting entry would adjust an expense account so the expense is reported when incurred.
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14.An adjusting entry to accrue an incurred expense will affect total liabilities.
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15.The difference between deferred revenue and accrued revenue is that accrued revenue has been recorded and needs adjusting and deferred revenue has never been recorded.
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34.The balance in the prepaid insurance account before adjustment at the end of the year is $4,000. The amount of the journal entry required to record insurance expense will be $2,500 if the amount of unexpired insurance applicable to future periods is $1,500.
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26.A contra asset account for Land will normally appear in the balance sheet.
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27.Depreciation Expense is reported on the balance sheet as an addition to the related asset.
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24.Accumulated Depreciation is reported on the income sheet.
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25.A building was purchased for $75,000. Assuming annual depreciation of $2,500, the book value of the building one year later is $77,500.
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4.The revenue recognition concept states that revenue should be recorded in the same period as the cash is received.
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5.The matching concept requires expenses be recorded in the same period that the related revenue is recorded.
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29.A company pays $240 for a yearly trade magazine on August 1. The adjusting entry on December 31 is debit Unearned Subscription Revenue, $100 and credit Subscription Revenue, $100.
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2.The accrual basis of accounting requires revenue be recorded when cash is received from customers.
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3.Generally accepted accounting principles require accrual-basis accounting.
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16.Deferrals are recorded transactions that delay the recognition of an expense or revenue.
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17.Adjustments for accruals are needed to record a revenue that has been earned or an expense that has been incurred but not recorded.
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32.A company pays $5,600 for two season tickets on September 1. If $1,400 is earned by December 31, the adjusting entry made at that time is debit Cash, $1,400 and credit Ticket Revenue, $1,400.
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31.A company payfive day work week, Monday - Friday. The adjusting entry on December 31, which is a Wednesday, is debit Wages Expense, $200 and credit Wages Payable, $200.
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28.A company pays $12,000 for twelve month's rent on October 1. The adjusting entry on December 31 is debit Rent Expense, $4,000 and credit Prepaid Rent, $4,000.
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11.Accruals are needed when an unrecorded expense has been incurred or an unrecorded revenue has been earned.
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12.An adjusting entry would adjust revenue so it is reported when earned and not when cash is received.
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6.The financial statements measure precisely the financial condition and results of operations of a business.
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7.Adjusting entries are made at the end of an accounting period to adjust accounts onthe balancesheet.
CHAPTER 3
THE MATCHING CONCEPT AND THE ADJUSTING PROCESS
Chapter 3—The Matching Concept and the Adjusting Process
TRUE/FALSE
1.The system of accounting where revenues are recorded when they are earned and expenses are recorded when they are incurred is called the cash basis of accounting.
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37.If the adjustment of the unearned rent account at the end of the period to recognize the amount of rent earned is inadvertently omitted, the net income for the period will be overstated.
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30.A company depreciates its equipment $350 a year. The adjusting entry for December 31 is debit Depreciation Expense, $350 and credit Equipment, $350.
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22.The Accumulated Depreciation's account balance is the sum of depreciation expense recorded in past periods.
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23.Accumulated Depreciation accounts are liability accounts.
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