Financial Accounting - Ch 3 SB Recharge

Ch 3 SB Recharge 1. On December 1, a company pays $3,600 for a 36-month insurance policy. After one month, accrual accounting requires $_____(100/3,600) of insurance expense be reported on the income statement ending December 31. However, if cash basis accounting is used, $_____(100/3,600) of insurance expense would be reported at the time of purchase. [100,3600] 2. A 12-month insurance policy was purchased on Dec. 1 for $4,800 and the Prepaid insurance account was initially increased for the payment. The required adjusting journal entry on December 31 includes a: (Check all that apply.) [Credit to Prepaid insurance for $400, debit to Insurance expense for $400] 3. Which of the following accounts would be considered a prepaid expense or prepaid asset account? (Check all that apply.) [Prepaid insurance, prepaid rent, supplies] 4. Which of the following describes accrued revenue? (Check all that apply) [They refer to earnings which have been earned but not yet billed. They refer to revenues that are earned in a period but have not been received and are unrecorded. Accounts receivable is usually increased when accruing revenues. The adjustment causes an increase in an asset account and an increase in a revenue account.] 5. All of the following are on an unclassified balance sheet: (Check all that apply) [Total liabilities, Total assets] 6. Identify which of the accounts below would be classified as a current asset. (Check all that apply.) [Prepaid rent, Accounts receivable, Office supplies, Cash] 7. A 12-month insurance policy was purchased on Dec. 1 for $3,600 and the Prepaid insurance account was increased for the payment. Demonstrate the required adjusting journal entry on Dec. 31 by selecting from the choices below [Insurance expense would be debited for $300] 8. Which of the following accounts is considered a prepaid expense? [Supplies] 9. Accrued _____ are earned in a period that are both unrecorded and not yet received in cash. [Revenues] 10. Describe an unclassified balance sheet. [An unclassified balance sheet is one whose items are broadly grouped into assets, liabilities, and equity] 11. Current assets are: [Cash and other resources that are expected to be sold, collected, or used within one year] 12. A plant asset can be defined by which of the following statements? (Check all that apply.) [It has a life within the business greater than one year or the current operating cycle, whichever is longer, It is reported on the balance sheet, Its original cost (minus any salvage value) is expensed over its useful life, It is a tangible long-term asset] 13. $1,000 of cash was received in advance of performing services. By the end of the period, $300 had not yet been earned. (The Unearned revenue account was increased at the time of the initial cash receipt.) Demonstrate the required adjusting journal entry by selecting from the choices below. (Check all that apply.) [Service revenue would be credited for $700, Unearned revenue would be debited for $700.] 14. A company borrowed $10,000 from the bank at 5% interest. The loan has been outstanding for 45 days. Demonstrate the required adjusting entry for this company by completing the following sentence. The required adjusting entry would be to debit the Interest _____ (expense/payable/receivable) account and _____ (debit/credit) the Interest _____ (expense/payable/receivable) account. [Expense, credit, payable] 15. What is a plant asset? [A plant asset refers to a long-term tangible asset used to produce and sell products or services] 16. An advance payment of $1,000 for services was received on December 1 and was recorded as a liability. By the end of the year, $400 had been earned. Demonstrate the December 31 adjusting entry by choosing the correct statement below. [Debit Unearned revenues for $400] 17. A calendar year-end reporting period is defined as a _____ (1 / 3 / 12) -month period which ends on _____ (December/January/March) 31st. [12, December] 18. The revenue recognition principle states that revenue: [Should be recorded when goods or services are provided to customers at an amount expected to be received] 19. Place the steps in the adjusting process in the correct order in which they would be performed: [Determine what the current account balance is, determine what the correct account balance should be, record an adjusting entry] 20. $1,000 of supplies were purchased at the beginning of the month. $300 were used during the month. (The Supplies account was increased at the time of the initial purchase.) Demonstrate the required adjusting journal entry by selecting from the choices below. (Check all that apply.) [Supplies expense would be debited for $300; Supplies would be credited for $300] 21. A company borrowed $4,000 from the bank at an interest rate of 9%. By the end of the accounting period, the loan had been outstanding for 30 days. Demonstrate the required adjusting entry by choosing the correct statement below. [Debit Interest expense for $30] 22. Explain what unearned revenues are by selecting the statements below which are correct. (Check all that apply.) [They refer to cash received in advance of performing a service or product, They are a liability, They are also called deferred revenues, They are reported on a balance sheet.] 23. Which of the accounts below are considered accrued expenses? [Wages expense, Interest expense] 24. $800 of supplies were purchased at the beginning of the month and the Supplies account was increased. As of the end of the period, $200 of supplies still remain. Which of the following is the correct adjusting entry? [Supplies expense would be debited for $600] 25. By the end of the accounting period, employees have earned salaries of $650, but they will not be paid until the following pay period. Demonstrate the required adjusting entry by completing the following sentence. The required adjusting entry would be to debit the Salaries _____ (expense/payable) account and _____ (debit/credit) the Salaries _____ (expense/payable/unearned) account. [Expense, credit, payable] 26. Explain your understanding of what an accrued expense is by selecting the statements below which are correct. (Check all that apply.) [They refer to costs that are incurred in a period, but are both unpaid and unrecorded, Examples of accrued expenses are wages expense and interest expense, Adjustments involve increasing both an expense and a liability account, They are reported on an income statement.]