PCP - Chapter 3: Adjusting Accounts for Financial Statements Questions & Answers
A calendar year-end reporting period is defined as a ____-month period which ends on ____ 31st.
12; December
Which of the following statements describes why accrual accounting better reflects a business's perf...
PCP - Chapter 3: Adjusting Accounts for
Financial Statements Questions &
Answers
A calendar year-end reporting period is defined as a ____-month period which ends on
____ 31st. - answer 12; December
Which of the following statements describes why accrual accounting better reflects a
business's performance? - answer Expenses are always recognized in the period in
which they are incurred.
Revenues are always recorded in the period in which they are earned.
Comparability of financial statements is improved.
Which of the following statements describes the expense recognition (matching)
principle? - answer Matching of expenses with revenues is a major part of the
adjusting process.
Expenses should be matched in the same accounting period as the revenues that are
recognized as a result of those expenses.
Describe the final step in the adjusting process. - answer The final step is to create
an adjusting journal entry to get from step 1 to step 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: - answer Debit to Insurance expense for
$400.
Credit to Prepaid insurance for $400.
$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? - answer Supplies expense would be
debited for $600.
On December 1, a company pays $3,600 for a 36-month insurance policy. After one
month, accrual accounting requires $____ of insurance expense be reported on the
income statement ending December 31. However, if cash basis accounting is used,
$____ of insurance expense would be reported at the time of purchase. - answer
100; 3,600
, Which of the following accounts is considered a prepaid expense? - answer Supplies
The expense recognition (matching) principle aims to record ____ in the same
accounting period as the ____ that are earned as a result of those costs. This principle
is a major part of the ____. - answer expenses; revenues; adjusting
What is a plant asset? - answer A plant asset refers to a long-term tangible asset
used to produce and sell products or services.
Place the steps in the adjusting process in the correct order in which they would be
performed.
Record an adjusting entry.
Determine what the current account balance is.
Determine what the correct account balance should be. - answer Determine what the
current account balance is.
Determine what the correct account balance should be.
Record an adjusting entry.
Explain what unearned revenues are by choosing the correct statement below. - answer
Unearned revenues refer to cash received in advance of providing a service or product.
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. - answer Insurance expense would be debited for $300.
$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. - answer Supplies expense would be debited for $300.
Supplies would be credited for $300.
Which of the following accounts would be considered a prepaid expense or prepaid
asset account? - answer Prepaid rent.
Prepaid insurance.
Supplies.
$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.) - answer Service revenue would be credited for
$700.
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