Explain what unearned revenues are by selecting the statements below which are correct. ), A plant asset can be defined by which of the following statements? Public companies, for in… Salaries payable will be debited for $500. (Check all that apply.) (Check all that apply). They are reported on a balance sheet. Challenge Review the following statements and determine which is (are) correct regarding an adjusted trial balance and how it is used In preparing financial statements. Choose the formula below that is used to calculate the current ratio of a business. It is estimated that it will have a life of 20 years and zero salvage value. Choose the statement below that demonstrates the correct adjusting entry to recognize depreciation expense on a building. Service revenue would be credited for $300.  They refer to cash received in advance of performing a service or product. StoryBook should record the following adjusting entry at the end of December: Service revenue would be credited for $400. By the end of the accounting period, employees have earned salaries of $500, but they will not be paid until the following pay period. FreshBooks has online accounting software for small businesses that makes it easy to generate balance sheets and view your unearned revenue. On February 1 of the current year, the customer paid $600 total, which included the $400 owed plus $200 owed through February 1st. They are also called deferred revenues. A contra account is an account that is linked with another _______ (report/account/statement). (Check all that apply.) By the end of the period, $300 had not yet been earned. The journal entry on January 31 is? v 4 Sort (adjusted) trial balance amounts to financial statements. By the end of the accounting period, employees have earned salaries of $650, but they will not be paid until the following pay period. If accounts are adjusted at the end of each month, the relevant journal entries are given below: Entry on January 01 when advance payment is received: Adjusting entry on January 31 to convert a portion of unearned revenue (a liability) to earned revenue: (3). B. accrual basis recognizes revenues when earned and records expenses when cash is paid C. accrual basis is the same as the cash basis D. accrual basis does not consider the revenue recognition principle E. accrual basis uses the adjusting process to recognize revenues when earned and to match expenses w/revenues What is needed in order to figure interest expense? As of December 31, the customer had not been billed nor had the transaction been recorded. (Check all that apply.). StoryBook Company provided services to several customers during the month of December. On January 31 of the current year, the customer paid $900 total, which included the $500 owed plus $400 owed for the current month of January. CLOSE revenues, gains, expenses, and losses to RETAINED EARNINGS (record in journal and post to ledger). They refer to earnings which have been earned, but not yet billed. it is sometimes referred to as the net amount of an asset. On January 4 of the current year, total salaries for the five-day week are paid. Unearned revenues refer to cash received in advance of providing a service or product. The recipient of such prepayment records unearned revenue … These assertions form a consolidated basis from which external auditors are able to develop a set of audit procedures. 1. journalize transactions into the journal, Identify which of the accounts below would be classified as a current asset. Define what the book value of an asset is by choosing the correct statement(s) below. Is unearned revenue a liability? Select the statements below that describe the purpose of a post-closing trial balance. $21,000 of equipment is purchased on December 1. • Read about this ~ 1 Income statement E} Statement of owner's equity E-:; Balance sheet ~ 4 Statement of cash flows Challenge Explain your understanding of what unearned revenues are by selecting the statements below which are correct. Reason: Unearned revenues refer to customer payments which have been received in advance of providing the service or product. Cash basis accounting recognizes _______ (equity/revenues/expenses) when cash is received and records ______ (revenues/expenses/liabilities) when cash is paid. The common accounts used are: Unearned Revenue, Deferred Income, Advances from Customers, etc. Illustrate your understanding of how to use the adjusted trial balance to prepare the balance sheet by completing the following sentence. In order to prepare an income statement using the account balances on an adjusted trial balance, all of the _______________(revenues/liabilities) and their credit balances are transferred to the income statement as well as all of the ________________ (expenses/assets) and their ______________ (debit/credit) balances. The required adjusting entry would be to debit the Salaries ________________ (expense/payable) account and _______________________ (debit/credit) the Salaries ______________________ (expense/payable/unearned) account. Unearned revenues refer to income reported on the income statement. The adjusted trial balance is a list of accounts and their balances after adjusting entries have been posted. (The Unearned revenue account was increased at the time of the initial cash receipt.) It has a(n)_________ (similar/opposite) balance and is _________ (added/subtracted) to/from the other account's balance. Explain what unearned revenues are by selecting the statements below which are correct. Demonstrate the required adjusting entry by choosing the correct statement below. Choose the statement(s) below which is (are) true regarding adjusting journal entries. Explain what unearned revenues are by choosing the correct statement below. 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 from them. FreshBooks has online accounting software for small businesses that makes it easy to generate balance sheets and view your unearned revenue. ), Explain what a contra account is by choosing the statement(s) below that correctly describe(s) a contra account. Explain what unearned revenues are by selecting the statements below which are correct. Calculate depreciation expense for one month, as of December 31, of the first year using the straight-line method. (The Supplies account was increased at the time of the initial purchase.) Book value is the original cost of an asset minus its accumulated depreciation. Subsequent end-of-period adjusting entries reduce Revenue by the amount not yet earned and increase Unearned Revenue. Revenue . 2. 1. determine what the current account balance is. Illustrate your understanding of how to use the adjusted trial balance to prepare an income statement by completing the following sentence. This principle is a major part of the _____ (timing/adjusting/estimating) process. They refer to cash received in advance of performing a service or product. Income statement, statement of owner's equity, balance sheet, statement of cash flows. Demonstrate the required adjusting journal entry on Dec. 31 by selecting from the choices below. They are also called accounts receivable. (Check all that apply.). All of the before and after words are correct B. accrual basis recognizes revenues when earned and records expenses when cash is paid C. accrual basis is the same as the cash basis D. accrual basis does not consider the revenue recognition principle E. accrual basis uses the adjusting process to recognize revenues when earned and to match expenses w/revenues This stock does not have any unearned revenues. v 3 Prepare adjusted trial balance. - Useful information must reach decision makers frequently. Define "current" as it applies to assets and liabilities on a classified balance sheet. This is why unearned revenue is recorded as an equal decrease in unearned revenue (a liability account) and increase in revenue (an asset account). -A contra account would be subtracted from another account. However, if cash basis accounting is used, $ _______(100/3,600) of insurance expense would be reported at the time of purchase. Insurance expense would be debited for $300. b. Service revenue would be credited for $300. Demonstrate the required adjusting entry by completing the following sentence. (Check all that apply.) The required adjusting entry would be to debit the _________________ (Unearned revenue/Accounts receivable/Cash/Interest receivable) account and __________________ (debit/credit) the ______________ (Cash/Accounts receivable/Interest revenue/Interest receivable) account. (Check all that apply.). -lists current assets in the order of how quickly they can be converted to cash. ~Your answer is correct. They are a liability They are reported on a balance sheet. (Check all that apply.). When does the closing process take place? Chimney's customers owe $2,000 to Chimney. Deferred or unearned revenue is an advance payment made by a customer for a product or service that has not yet been rendered (delivered). Explain a contra account by filling in the following blanks. Demonstrate the required adjusting entry by completing the following sentence. If a company has received cash but hasn't performed the work yet, the revenue is unearned and should be recorded as a liability. Some of the steps in the accounting cycle are listed below. Explain what unearned revenues are by selecting the statements below which are correct. $1,000 of supplies were purchased at the beginning of the month. Define the Income Summary account. Closing means to transfer account balances from ______ (asset/liability/permanent/temporary) accounts so that they will start with a ______ (contra/larger/zero) balance at the beginning of the next period. Current assets divided by current liabilities, cash and other resources that are expected to be sold, collected or used within one year. These services have not yet been paid by the customers. Explain what unearned revenues are by selecting the statements below which are correct. Unearned revenue is money received by an individual or company for a service or product that has yet to be provided or delivered. Which of the following statements about the Accumulated depreciation account is (are) correct? The income summary account is an intermediary between revenues and expenses, and the Retained Earnings account. $300 were used during the month. (Check all that apply. The balance in the Income Summary account equals the net income or loss for the period. An unclassified balance sheet is one whose items are broadly grouped into assets, liabilities, and equity. 8 - Explain what unearned revenues are by ohoosing the oorreot statement below I and about this x Sorry your answer Is Incorrect L'J Uneamed revenues A depreciation adjustment would include a debit to ______ (depreciation expense/accumulated depreciation/building) and________(debit/credit) to _________ (depreciation expense/accumulated depreciation/building). Demonstrate the required half of the adjusting entry by choosing the correct statement below. !J Reed about !tis v 1 Enter unadjusted trial balance. not yet been earned. (The Uneared 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.). The adjustment to show the supplies used up would cause _______ (assets/liabilities/expenses) to be reduced and _________ (expenses/liabilities/revenues) to be increased, so net income would decline. They are a liability They are reported on a balance sheet. (Check all that apply.) On December 28, I. M. Greasy, Catering completed $600 of catering services. Unearned revenue would be debited for $300. They refer to earnings which have been earned, but not yet billed. PREPARE a complete set of financial statements and disseminate it to users. Explain what unearned revenues are by selecting the statements below which are correct. Which of the accounts below are considered accrued expenses? For the current year, Bubbles Office Supply had earned $600 of interest on investments. If an adjusting entry for unearned revenue is not recorded, what is the effect on the financial statements? Determine which of the following transactions may require adjustments. (Check all that apply.). (Check all that apply.). -Its original cost (minus any salvage value) is gradually expensed over its useful life. Which of the following lists steps of the accounting cycle in the correct order (note that not all steps are listed)? 8. This one is for a fictional business: Doris Orthodontics.As you can see on the right, there are different financial statements that each account corresponds to: the balance sheet and the income statement. Unearned revenue would be debited for $700. Recall the order in which financial statements are prepared. Debit accounts receivable and credit services revenue. For the current year, a business has earned (but not recorded or received) $200 of interest from investments. (Check all that apply.). List the order in which financial statements are prepared. A classified balance sheet can be described as a balance sheet that: (Check all that apply.). (Check all that apply.) For this illustration, let us use Unearned Revenue.Suppose on January 10, 2017, ABC Company made $30,000 advanced collections from its customers. (The Uneared revenue account was increased at the time of the initial cash receipt) Demonstrate the required adjusting journal entry by selecting from the choices below. Explain what unearned revenues are by selecting the statements below which are correct. Unearned Revenue is a liability account that registers funds a seller receives for goods or services not yet delivered to the buyer. Explain what unearned revenues are by selecting the statements below which are correct. The final step is to create an adjusting journal entry to get from step 1 to step 2. On December 27, a business completed a $400 service that had not yet been billed or recorded as of December 31. This makes sure the equation continues to balance. A 12-month insurance policy was purchased on Dec. 1 for $3,600 and the Prepaid insurance account was increased for the payment. Which of the following statements describes the expense recognition (matching) principle? (Check all that apply.) It reports amounts owed to employees and is a liability. Describe the final step in the adjusting process. What is the difference between an adjusted trial balance and an unadjusted trial balance? Chimney Sweeps provided chimney cleaning services to several clients during the month of February. This makes sure the equation continues to balance. "The company has grown into a € 100 million business." ), a list of accounts and balances after adjusting entries have been recorded and posted. Place them in the correct order of use. The expense recognition (matching) principle requires that _____ (expenses/assets/liabilities) be recorded in the same accounting period as the ______ (expenses/revenues/assets) that are recognized as a result of those costs. The account allows both the original cost of plant assets and the total depreciation taken to be shown simultaneously. How will Chimney Sweeps record this transaction? Service revenue would be credited for $300. The recipient of such prepayment records unearned revenue … 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 from them Describe the final step in the adjusting process. Supplies expense would be debited for $600. 'ii' Your answer Is correct! Explain what unearned revenues are by choosing the correct statement below. Deferred revenue, or unearned revenue , refers to advance payments for products or services that are to be delivered in the future. Demonstrate what the correct adjusting entry should include by choosing the correct statement below. Explain the required steps to complete a work sheet by placing the following in the correct order of completion. The main premise is that for each line in the financial statements, the auditors’ primary objective is to en… An advance payment of $1,000 for services was received on December 1 and was recorded as a liability. Which of the following is the correct adjusting entry? Explain the difference between the unadjusted and the adjusted trial balance. If the liability method is used, the entry would be:Take note that the amount has not yet been earned, thus it is proper to record it as a liability. CGA notes that some companies fail to do this and simply mark the cash as revenue. The closing process takes place at the ______ (end/beginning) of an accounting period, after the ________ (adjusted/unadjusted) trial balance is prepared and_________ (after/before) the financial statements are prepared. $1,000 of cash was received in advance of performing services. Only when the revenue is recorded in the balance sheet, this transaction isthen also reflected in the income statement. (Check all that apply.). Here’s a sample chart of accounts list. The formula for figuring interest expense is: Unearned revenue would be debited for $700. (Check all that apply.) c. They refer to cash received in advance of performing a service or product. Show your understanding of the steps involved in adjusting entries by placing the following steps in the correct order of preparation. And increased revenues by 4.8% for the December quarter however much of this was due to growth via new acquisitions as described above. Explain what unearned revenues are by selecting the statements below which are correct. By the end of the year, $400 had been earned. At the end of the previous year, a customer owed Chocolates R US $500. (Check all that apply.). Which of the following statements describes why accrual accounting better reflects a business's performance as compared to the cash basis?  They are also called deferred revenues. The formula for figuring interest expense is: Unearned revenue would be debited for $700. A business has a $10,000 loan from a bank at 8% annual interest. $1,000 of cash was received in advance of performing services. (Check all that apply.). As of the end of the period, $200 of supplies still remain. Calculate the amount of interest to accrue if the loan has been outstanding for 45 days. A business has a $5,000 loan from a bank at 16% annual interest. (Check all that apply.). Ans: a. $500 of supplies were purchased at the beginning of the period. (Check all that apply.). Demonstrate the required adjusting entry by choosing the correct statement below. Explain what unearned revenues are by choosing the correct statement below. ), amount owed x interest rate x fraction of the year since last payment. The journal entry to record the payment of salaries on January 4 includes: The adjustment causes an increase in an asset account and an increase in a revenue account. What would be the journal entry on January 31 that reflects this? Unearned revenues refer to cash received in advance of providing a service or product. At the end of the previous year, a customer owed Days Company $400. Once the purchased goods or services are delivered, the seller is said to have earned the revenues and now recognizes the same funds as revenue earnings in an Income statement … Once the purchased goods or services are delivered, the seller is said to have earned the revenues and now recognizes the same funds as revenue earnings in an Income statement … Debit Depreciation expense; credit Accumulated depreciation. Chimney's customers have not yet been billed. -A temporary account has a balance for only one period. (Check all that apply.). Here’s what a chart of accounts looks like. Unearned revenues refer to amounts owed to the company that have not yet been billed. The adjusted trial balance is prepared after adjusting entries have been recorded and posted. Unearned revenue would be debited for $700. ADJUST revenues and expenses and related balance sheet accounts (record in journal and post to ledger) 5. (Check all that apply.). Closing means to bring an account balance to zero. (Check all that apply. 4. Look at the before and after words for Account Category: Unearned Revenue Liabilities, and select the correct statement below; A. (Check all that apply.) amount owed x interest rate x fraction of the year since last payment. They are also called accounts receivable. Demonstrate your knowledge of a depreciation adjusting entry by completing the following sentence. $800 of supplies were purchased at the beginning of the month and the Supplies account was increased. Three days later, on January 3, total salaries of $4,000 (including the $500 accrued at year end) are paid. Unearned revenues refer to customer payments which have not yet been received. the revenues on the income statement will be understated. Chart of accounts sample. Explain what uneared revenues are by choosing the correct statement below. The required adjusting entry would be to debit the _____________________ (Unearned revenue/Accounts receivable/Cash/Service revenue) account and _______________ (debit/credit) the ________________ (Unearned revenue/Accounts receivable/Cash/Service revenue) account. A 12-month insurance policy was purchased on Dec. 1 for $4,800 and the Prepaid insurance account was initially increased for the payment. -Accumulated depreciation accumulates the total depreciation taken on an asset since its purchase. ), Which of the following describe the Salaries payable account? (Check all that apply.). Businesspeople sometimes describe companies informally with a single currency figure, for example: 1. Unearned revenues refer to cash received in advance of providing a service or product. Demonstrate the required journal entry on January 3 by selecting from the choices below. What is the purpose of the Accumulated Depreciation account? They are reported on a balance sheet. (Check all that apply.). d. They are a liability. After one month, accrual accounting requires $ _________(100/3,600) of insurance expense be reported on the income statement ending December 31. Which of the following could be a logical or realistic accounting period for a business that is creating financial statements? By the end of the year, $400 had been earned. -an accounting system that uses the matching principle to determine when to recognize revenues and expenses. Which of the following is (are) true regarding timeliness and the importance of periodic reporting? A company borrowed $4,000 from the bank at an interest rate of 9%. Illustrate your understanding of how to use the adjusted trial balance to prepare a statement of owner's equity by completing the following sentence. An adjusting journal entry is made at the ______ (beginning/middle/end) of an accounting period. Accrual basis accounting recognizes _______ (equity/revenues/expenses) when the service or product is delivered and records _______ (revenues/expenses/liabilities) when _______ (incurred/paid) in order to adhere to the matching, an accounting system which recognizes revenues when cash is received and records expenses when cash is paid. During the period, $90 of supplies were used. Unearned Revenue is a liability account that registers funds a seller receives for goods or services not yet delivered to the buyer. This one is for a fictional business: Doris Orthodontics. Calculate depreciation expense for the month of December using straight-line depreciation. Explain what unearned revenues are by selecting the statements below which are correct. Trial balance, Adjusting journal entries, Post-closing trial balance. 4. Multiple Choice Question Explain what unearned revenues are by choosing the correct statement below. Demonstrate the required adjusting journal entry by selecting from the choices below. v 2 Enter adjustments. On December 1, a company pays $3,600 for a 36-month insurance policy. Demonstrate the required adjusting journal entry by selecting from the choices below. (Check all that apply.). After each monthpasses, the unearned revenue account is reduced by $1,500, and the revenue isincreased by the same amount to maintain the balance and recognize the earnedrevenue. "That is a $15 billion company." Demonstrate the required adjusting journal entry by selecting from the choices below. (Check all that apply.  They are reported on a balance sheet. Which of the following accounts would be considered a prepaid expense or prepaid asset account? Click the answer you think is right Unearned revenues refer to amounts owed to the company that have not yet been billed. McDarrel's records $500 of accrued salaries on December 31. (Check all that apply.). Accounts receivable will be credited for $400. l! 6. All of the before and after words are correct By the end of the accounting period, the loan had been outstanding for 30 days. Once you board the plane and land at your destination, the airline converts this dollar amount to sales. Accrued _______________ are earned in a period that are both unrecorded and not yet received in cash. Current items can be described as those expected to come due within one ________ (month/year) and are listed in the order of how _______ (quickly/slowly) they could be converted to or paid in cash. It is any period which consists of 12 consecutive months. By the end of the accounting period, employees have earned salaries of $650, but they will not be paid until the following pay period. By the end of the period, only $100 remains. A classified balance sheet has several categories for assets and liabilities including: (Check all that apply.). -Expenses are always recognized in the period in which they are incurred. Unearned revenue would be debited for $300. Place the steps in the adjusting process in the correct order in which they would be performed. At the end of January, the total value of the services provided to Mr. Y is $15,000. Which of the accounts below are considered accrued expenses? Which of the following is the proper adjusting entry? The adjustment to show the $400 of supplies used would have the following effect(s). Unearned revenue, also known as deferred revenue, is the amount ofmoney a company has collected but have not provided the goods or services being paidfor at the time it received the payment. That registers funds a seller receives for goods or services not yet been received statement ending December 31 the. 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