Overview. A. Which of the following statements about the closing process is correct? prepared for the purpose of setting the balances for the balance sheet accounts for the next period, closes out temporary accounts (income statement accounts), A contra account, related to accounts receivable, that holds the estimated amount of uncollectible accounts. Only temporary accounts are closed at the end of the accounting period. If the accounting year-end falls on a Tuesday, the adjusting journal entry to record this will include a: debit to Salaries and Wages Expense 40,000. Adjustments ensure that ________ balances are reported at amounts representing the economic benefits that remain at the end of the period and will be used-up in future periods. An expense has been incurred but not yet paid in cash. The amount of change in each line item is calculated. Which one of the following accounts below would likely be included in a deferral adjusting entry? Which of the following statements about the withdrawal of funds from a traditional IRA is true? Accrual adjustments can increase assets and increase revenues. The note payable and the accrued interest will become due and payable next year. The value of tax deferral increases as the taxpayer’s discount rate for computing NPV decreases. 22. Debit Interest Receivable $50 and credit Interest Revenue $50. E) All of the above statements are true d. It is not useful for analyzing changes in financial statements over time. Recording an adjusting journal entry to recognize depreciation would cause: A decrease in assets, a decrease in stockholders' equity, and an increase in expenses, Cost of equipment - the related accumulated depreciation. Favorite Answer. Lv 7. These salaries and wages were paid on the following January 5. a. unearned revenue. b. interest revenue. The recording of adjusting entries is supported by the, The purpose of the adjusted trial balance is to verify, Clever Computers has a 5-day work week and pays the office staff $3,050 each week. (c) Adjusting entries affect the cash account (d) A physical inventory at the end of the period revealed that there were $585 of supplies on hand. A : Accrual-basis accounting is optional under generally accepted accounting principles. Which of the following best describes when an accrual adjustment is required? Hence, an accrual-type adjusting journal entry must be made in order to properly report the correct amount of utilities expenses on the current period's income statement and the correct amount of liabilities on the balance … A company pays salaries and wages every two weeks. (b) Adjustments for wages and income taxes are normally accrual adjustments. During 2016, the company had revenues of $400,000 and expenses of $350,000, and the company declared and paid dividends of $11,000. Adjusting entries are intended to change the operating results to reflect management's objectives for operating performance. b. (A) Adjustments to prepaid expenses and unearned revenues are deferral adjustments. B. The purpose of recording an adjusting entry for salaries and wages is to record wages: What is the effect of the December 31 adjusting entry to record $400 of revenues earned but not yet collected? Tax deferral is not an effective planning strategy if the taxpayer’s marginal tax rate is stable over time. How will the interest affect the adjustments at the end of the period? If an adjustment for $7,500 in accrued revenues is omitted, how will this affect the financial statements? Interest earned and receivable on a note receivable equals $50 for the month of March. A) Withdrawals of deductible contributions between the ages of 59.5 and 65 are subject to a tax penalty unless they are withdrawn because of specified circumstances such as death or long-term disability. Cost less accumulated depreciation gives net book value. Definition of Deferral. Once the adjusted trial balance is balanced, it can be used to prepare, The unearned subscriptions account reflected a balance of $32,500 prior to any adjustments. (You May Select More Than One Answer.) The company uses up $5,000 of an existing asset and the company adjusts its accounts accordingly. prepared for the purpose of preparing the financial statements. The replacement period begins on the … B. A third example is the accrual of utilities expense. The income statement consists of assets, expenses, liabilities, and revenues. The closing entry involving a net loss will include a: A post-closing trial balance does NOT include the: What is the usual last step in the accounting cycle? Adjustments help to ensure the related accounts on the balance sheet and income statement are up to date and complete. An adjustment to accrue the amount of salaries and wages owed was recorded on December 31. Salaries and Wages Payable and Credit to Cash. The company pays the rent owed on the tenth of each month for the previous month. GreenSource Company began the period with $330 in supplies. Interest Expense should be increased, because the cost of interest relates to the current period. Answer Accruals are adjustments that are recorded prior to the associated cash flow ta. C : Accrual-basis accounting recognizes expenses when they are incurred. Lansing Limited had a beginning balance in its Retained Earnings account of $385,600. c. It is useful in analyzing relationships within a financial statement. Which source provides the raw material to prepare the financial statements? The value of tax deferral increases as the taxpayer's discount rate for computing NPV decreases. An accrual pertains to:. C. Cash flows are more reliable than accruals. A company owes rent at a rate of $6,000 per month. The firm recorded the following journal entry: The balance in the Unearned Service Revenues liability account established when MicroTrain received the cash will be converted into revenue as the company performs the training services. In the closing process, ________ are zeroed out by crediting each account and ________ are. B) When closing journal entries are prepared, contributed capital is debited if a company has a net loss. b.Cash is used in the accrual process. Which of the following statements regarding adjusting entries is not true? Wages payable C. Fees earned D. Accumulated depreciation 2. Which of the following statements is not true? deferral adjustments are made after taxes and accrual adjustments are made before taxes. The adjusting entry should include a, In the vertical analysis of an income statement. CheckedB. A. The deferral adjustment to record the amount of unearned service revenue that is now earned includes a: How do deferral adjustments for prepaid expenses—such as rent—that were initially recorded as assets affect assets on the balance sheet and expenses on the income statement? The entry on January 5 would include. C. What is the purpose of the adjusted trial balance? B) Concessions is another word for adjustments in position. A. B. c.Accrual accounting recognizes revenues and expenses based on current period cash flows. Definition of an Accrual. Deferral adjustments are required to update previously recorded items whereas accrual adjustments are required to include items not previously recorded. The income statement shows the results of a company’s operations at a specific point in time. Without adjustments, the financial statements present an incomplete and misleading picture of the company. Which one of the following statements is true? On March 31, the company pays wages for the two weeks ending March 24 and recorded the related journal entry. On December 7, MicroTrain Company received $4,500 from a customer in payment for future training services. This is an example of a(n): The term, deferral, best describes a situation in which: cash is paid in advance of recognizing an expense, assets and revenues or increasing liabilities and expenses. d. The value of the COLA is based on the consumer price index (CPI). Tax deferral is not an effective planning strategy if the taxpayer's marginal tax rate is stable over time. Deferring a revenue or expense account in accounting means that the amount: will be reported as a revenue or an expense in a later period. How do temporary accounts differ from permanent accounts? Which of the following items represents a deferral? Which of the following statements about a cruel and deferral errors is correct? Answer Save. Answers: deferral adjustments involve previously recorded transactions and accruals involve previously unrecorded events. To avoid the 10% penalty, generally an employee should not withdraw retirement money BEFORE the age of 59 1/2. Deferral errors only affect income statement accounts c. Accrual and deferral errors affect both income statement and balance sheet accounts D. All of the above During the month, an additional $1,500 of supplies were purchased. One major difference between deferral and accrual adjustments is that deferral adjustments: deferral adjustments involve previously recorded assets and liabilities and accrual adjustments involve previously unrecorded assets and liabilities, both income statement and balance sheet accounts. What adjusting entry, if any, should be recorded as of March 31? Accounts Receivable should be increased by $400 and Sales Revenue should be increased by $400. An adjustment to record unrecorded fees earned was posted during the current period. Which of the following statements is TRUE for gases? Which of the following statements about tax deferral is true? Sandy. What is the amount of rent expense that will be recorded in the related adjusting entry dated June 30? A. After adjusting entries are prepared and posted, but before closing entries are preparedand posted, the balance in Retained Earnings is equal to: the amount that was reported on the previous year's balance sheet. Question: Which Of The Following Statements About The Accumulated Depreciation Account Are True? Salaries and Wages Expense will increase by the amount of the unpaid salaries and wages. 2 Answers. Which of the following statements about the income statement is correct? A. Retained earnings on the balance sheet. Relevance. C) Concession making exposes the concession maker to some risk. 24. After the adjustments have been completed, the adjusted balance in the Interest Payable account, interest that has accrued, but has not been paid, at the end of the period, The adjusting entry to record interest owed on obligations at the end of the accounting period includes, Interest Expense and credit to Interest Payable. What is the necessary adjusting journal entry on December 31, 2015? What are the effects on the accounting equation from the adjustment for salaries and wages incurred, but not yet paid, during the accounting period? Which one of the following statements is true? Multiple Choice An Accrual Adjustment That Increases An Asset Will Include An Increase In An Expense. C. deferral adjustments are made annually and accrual adjustments are made monthly. (b) Adjustments for wages and income taxes are normally accrual adjustments. The majority of collective bargaining agreements provide for monthly COLA adjustments. Adjusting entries are intended to change the operating results to reflect management's objectives for operating performance. d. Accrual accounting may use either two asset or two liability accounts. Adjusting entries often affect the cash account. After closing entries are posted, the balances of the income statement accounts will be zero, temporary accounts are closed; permanent accounts are not. B : Accrual-basis accounting follows the fiscal year assumption. If no errors have been made, when a company prepares its adjusted trial balance: the debit column and the credit column will be equal. C. When should supplies be recorded as an expense? Which of the following statements is not true? Which of the following statements about the need for adjustments is not correct? Three months of rent were prepaid on May 1 for $7,200, but two months' have now expired, leaving only one month prepaid at June 30. c. Accrual accounting recognizes revenues and expenses based on current period cash flows. What is a deferral? Before MicroTrain prepares its financial statements, it must make an adjusting entry to transfer the amount of the services performed by the company from a liabilit… Which of the following accounts would be classified as a current liability on a classified, The Don't Tread on Me Tire Company had Retained Earnings at December 31, 2015 of $200,000. An example of an account that could be included in an accrual adjustment for revenue is: If an expense has been incurred but will be paid later, then: a liability account is created or increased and an expense is recorded. To ensure that total debits equal total credits after the adjustments have been recorded. Which of the following statements is TRUE of cost-of-living adjustments (COLAs)? Adjustments are needed to ensure that the accounting system includes all of the revenues and expenses of the period. What was the amount of dividends declared during the year? (c) Adjusting entries affect the cash account (d) Adjusting entries involve one income statement account and one balance sheet account. If certain assets are partially used up during the accounting period, then: an asset account is decreased and an expense is recorded. Accrual errors affect only balance sheet accounts. A. Salaries and wages amount to 100 a day and they company has a seven day work week. The company pays the interest once a quarter. Which of the following statements regarding adjusting entries is not true? A company pays its workforce on Fridays for a five-day workweek ending on that day. D : Accrual-basis accounting recognizes revenues when they are received in cash. D. All accrual accounting adjustments are value irrelevant. What statement about concessions is false? A:only … If revenues are less than expenses, the company has a net loss and Retained Earnings decreases. As a result the company will incur the utility expense before it receives a bill and before the accounting period ends. B. If the month ends on a Thursday, the adjusting entry will credit Wages Payable for. Retained Earnings is a permanent account; income statement accounts are temporary. Total liabilities will increase and total stockholders' equity will decrease. Which of the following statements regarding the effect of a net loss on the closing process is true? What is the main difference between accrual and deferral adjustments? At the last journal entries at the end of each accounting year. Adjustments are needed to ensure that the accounting system includes all of the revenues and expenses of the period. 61. Accrued revenues recorded at the end of the current year: often result in cash receipts from customers in the next period. A company has a loan that accrues interest at a rate of $20 a day. Adjustments to revenue accounts at the end of the accounting period are made to adhere. management; … B. Yulan, Inc has beginning Retained Earnings of $22,000, ending Retained Earnings of $32,000, and net income of $15,000. Solved Expert Answer to Which one of the following statements is true? A. To calculate the company's income tax expense for the current period, it is necessary to know the company's: adjusted income (before income taxes) and the company's tax rate. Which of the following statements about revenues and expenses is correct? A taxpayer files Form 1040X to report the taxable gain when no replacement property was acquired within the required replacement period. All cash flows are value relevant. (A) Adjustments to prepaid expenses and unearned revenues are deferral adjustments. The process of allocating the cost of buildings, vehicles, and equipment to the accounting periods in which they are used is called: Which of the following statements about the presentation of a trial balance is correct? Temporary accounts are closed at what stage of the accounting process? B. Assuming that revenues exceed expenses, which of the following correctly indicates the structure of the journal entry that is used to close revenue and expense accounts? A) Concessions are central to negotiations. It is determined that $9,800 in subscriptions remain unearned at the end of the period. Accumulated depreciation is the amount of depreciation recognised at the date of disposal of the asset. 1. Which of the following statements about adjustments is correct? B. Adjustments help to ensure that all ________ are recorded in the period in which they are incurred. Which of the following statements about adjusting entries is not correct? The key regarding qualified retirement plans is that they provide tax deferral of investments. Which of the following statements is correct regarding the adjustment for salaries and wages accrued but not paid at the end of the accounting period? Answer Accruals are adjustments that are recorded prior to the associated cash flow ta. Adjustments help the financial statements present the economic resources that the company owns and owes at the end of the period. Textbook solution for Income Tax Fundamentals 2020 38th Edition WHITTENBURG Chapter 11 Problem 20MCQ. What is the difference between an accrual and a deferral? Which is the first financial statement that should be prepared after the adjusted trial balance has been prepared? Question: The Closing Process Includes A Transfer Of The Dividends Account Balance To The Retained Earnings Account True Or False False True Which Of The Following Statements About Adjustments Is Correct? 2. Which of the following statements regarding the income statement is true? The adjusting journal entry should include a. At the end of each month, what kind of adjustment is required? The adjusting journal entry, dated March 31, to record unpaid wages and salaries owed since March 25 will include a debit to: Salaries and Wages Expense and a credit to Salaries and Wages Payable for $700. As of December 31, $2,500 of interest expense has accrued on a $50,000 note payable. We have step-by-step solutions for your textbooks written by Bartleby experts! If total debits are not equal to total credits in an adjusted trial balance, which of the following, Posting a credit to Salaries and Wages Payable as a debit to that account. a.Accruals are adjustments that are recorded prior to the associated cash flow taking place. 18. 1. The order of accounts on a trial balance is as follows: assets, liabilities, stockholders' equity. 1) An accrual adjustment that increases an asset will included an increase in an expense 2) A deferral adjustment that decreases an asset will included an increase in an expense 3) An accrual adjustment that increases an expense will include an increase in assets B. One of the major advantages of making adjustments in order to improve the quality of financial statements is that they: ensure that revenues and expenses are recognized during the period they are earned and incurred. Which of the following statements is true about vertical analysis? This Contra-account Is Subtracted When Determining Total Assets On The Balance Sheet. How can accrual adjustments for interest earned but not yet collected affect the balance sheet and the income statement? A. Which of the following statements about the Retained Earnings account is correct? Which of the following statements is true? 2:The volume of gas is directly proportinal to the pressure in torr. In other words, the future amount is deferred to a balance sheet account until a later accounting period when it will be moved to the income statement. Deferral adjustments decrease assets and increase expenses. A. 60. expenses that should be reported now, but have not yet been recorded or paid, and; revenues that should be reported now, but have not yet been recorded nor has the money been received; Example of an Expense Accrual. A deferral often refers to an amount that was paid or received, but the amount cannot be reported on the current income statement since it will be an expense or revenue of a future accounting period. c. accounts receivable. Each line item is expressed as a percentage of owner's equity. Adjustments help to ensure the related accounts on the balance sheet and income statement are up to date and complete. A) If a company has a net loss during the current accounting period, then the post -closing retained earnings will be smaller than the pre-closing retained earnings. In the period the supplies are used, regardless of when they were purchased, Supplies should be ________ and Supplies Expense should be ________ for supplies used up during the period. On December 31, 2015, interest of $500 is owed on a bank loan that will not be paid until June 30, 2016. The IFRS grants limited exemptions from the general requirement to comply with each IFRS effective at the end of its first IFRS reporting period. Which of the following would cause the adjusted trial balance totals to be unequal? Which of the following statements about tax deferral is true? d. deferral basis. Which of the following statements about accruals and cash flows is true? Debit Interest Expense and credit Interest Payable. Debit Revenues, credit Expenses, and credit Retained Earnings. 8 years ago. Which of the following statements about accumulated depreciation is true? A deferral adjusting entry that adjusts assets (such as prepaids and supplies): expenses the amount used during the period. a. Debit Interest Expense and credit Interest Payable for $500. D) Reciprocating concessions is a haphazard process. Before the closing entries are prepared, the Retained Earnings balance in the adjusted trial balance is equal to the balance of that account: Which of the following statements about the need for adjustments is not correct? Utilities provide the service (gas, electric, telephone) and then bill for the service they provided based on some type of metering. 1:the temputure of gas is inversely proportinal to its pressure. a. Accruals are adjustments that are recorded prior to the associated cash flow taking place. a. unearned revenue. 3:The pressure of gas is due to collision to the gas molecules. deferral adjustments are influenced by estimates of future events and accrual adjustments are not. Which of the following adjustments would be made at the end of a month in which no payment for interest was made? Revenues are listed before expenses on the income statement. Cash is used in the accrual process. Adjusting entries are typically prepared: transfer net income (or loss) and Dividends to Retained Earnings, cause the revenue and expense accounts to have zero balances. A. Prepaid insurance B. Which of the following is true regarding adjusting entries? Cash flows cannot be manipulated. The payroll for a week is $100,000. Study Chapter 9 flashcards from aera Hoffman 's class online, or in Brainscape's iPhone or Android app. IFRS 1 First-time Adoption of International Financial Reporting Standards sets out the procedures that an entity must follow when it adopts IFRSs for the first time as the basis for preparing its general purpose financial statements. Which of the following statements regarding tax deferral of casualty gain is FALSE? Learn faster with spaced repetition. Which of the following statements is true about vertical analysis? The income statement provides information about the profitability and growth of a company. b. , then: an asset account is decreased and an expense adjustments, the adjusts! Files Form 1040X to report the taxable gain when no replacement property was acquired within the required replacement begins! Are influenced by estimates of future events and accrual adjustments are made to adhere bargaining agreements provide monthly! 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