The required adjusting entry would be to debit the Salaries _____expense/payable) account and____debit/credit) the Salaries ____expense/payable/unearned) account. $800 of supplies were purchased at the beginning of the month and the Supplies account was increased. a) If a prepaid expense was initially recorded as an expense, then expenses will be higher on the income statement. b) Examples of accrued expenses are wages expense and interest expense. They refer to earnings which have been earned, but not yet billed. The journal entry on February 1 is? Adjustments involve increasing both an expense account and a liability account. (Check all that apply) A post-closing trial balance is a list of _______ accounts and their balances from the ________ all _________ entries have been journalized and posted. In some cases, bankruptcy may be the only course available. Demonstrate the required adjusting entry of the business by completing the following sentence. -Temporary accounts have a balance for one period only. However, the income represents the net of revenues and expenses. Generally, unearned revenues are classified as short-term liabilities because the obligation is typically fulfilled within a period of less than a year. (Check all that apply.) Service revenue would be credited for $700. The formula to figure out the profit margin of a company is _______ divided by ________. b) Credit Interest expense for $30. c) Record all prepaid expenses with debits to expense accounts. Explain. By the end of the accounting period, the loan had been outstanding for 30 days. Three days later, on January 3, total salaries of $4,000 (including the $500 accrued at year end) are paid. -The Accumulated depreciation account allows the original cost of the asset to remain in the plant asset account. Hub. Once the service or product has been provided, the unearned revenue gets recorded as revenue on . (Check all that apply.). Accumulated depreciation is a contra account. b) Net income is increased. Review the key term below. Statement of Owner's Equity (Retained Earnings) Demonstrate the required adjusting entry by completing the following sentence. These services have not yet been paid by the customers. c) A revenue account will be increased. b) Wages expense will be debited for $4,000. The company records prepaid and unearned items in balance sheet accounts. ), Which of the accounts below are considered accrued expenses? (Check all that apply.) -Accumulated depreciation is a contra account. $1,000 of supplies were purchased at the beginning of the month. d) The revenues on the income statement will be understated. Which of the, An advance payment of $1,000 for services was received on December 1 and. (Check all that apply.). interest receivable Which of the statements below is (are) correct regarding the accounting cycle? a) a list of accounts and balances before adjusting entries have been recorded and posted -An account that contains a credit for the sum of all revenues -Retained Earnings is a permanent account, but Dividends is a temporary account. b) It reports amounts owed to employees and is a liability. Unearned revenue is money received by an individual or company for a service or product that has yet to be fulfilled. The following accounts appear in an adjusted trial balance of Kangaroo Consulting. 4. prepare financial statement. ), $1,000 of supplies were purchased at the beginning of the month. -Its original cost (minus any salvage value) is expensed over its useful life. (Check all that apply. Long-term liabilities are debts of a business that are not due to be settled within one year. In order to prepare the statement of owner's equity, the Owner _______ (Capital, Cash) account balance as well as any debit balance in the ______ (Withdrawals, Supplies) account is transferred from the adjusted trial balance and is used along with the reported net income (loss) from the Income statement. The recognition of deferred revenue is quite common for insurance companies and software as a service (SaaS) companies. The expense recognition (matching) principle aims to record ________ in the same accounting period as the ________ that are earned as a result of those costs. O A financing activity on the statement. B. Contra asset is an account shown as an addition to the asset. They refer to cash received in advance of performing a service or, $1,000 of cash was received in advance of performing services. a) Each adjustment is identified by a letter in parentheses that serves as a cross-reference to the debit and credit side of the adjustment. -Temporary accounts are reported on the income statement. b) Supplies were purchased at the beginning of the year, but not all were used. billed. Which of the following statements about the Accumulated depreciation account is (are) correct? the purpose of the closing process is to reset _______ account balances to zero and to transfer the changes in all of these accounts to the Retained _______ account. -a 24-month insurance policy was prepaid, Determine which of the following transactions may require adjustments. Calculate the first month's depreciation expense as of December 31 using the straight-line method. McDarrel's records $500 of accrued salaries on December 31. Patent The difference between income and revenues is self-explanatory. a) Debit Unearned revenues for $400. d) Debit to Salaries Payable for $500; Debit to Salaries Expense for $2,000, d) Debit to Salaries Payable for $500; Debit to Salaries Expense for $2,000, Not recording an adjusting entry for accrued revenue will result in: (Check all that apply). After the distribution is made, (1) prepare the updated stockholders' equity section and (2) compute the number of shares outstanding. Unearned revenue, Utility expense They are also called accounts receivable. As of the end of the period, $200 of supplies still remain. Assume that Microsoft recognized $2000 million of unearned revenue as revenue during the year, what entry for unearned revenue did Microsoft make during the year? Recently, he discovered Amazon Prime services. a) The first day of the period They are a liability. (Check all that apply.). Unearned revenues refer to income reported on the income statement. O A liability on the balance sheet. Thank you for reading CFIs guide to Unearned Revenue. (Check all that apply.) To keep learning and developing your knowledge of financial analysis, we highly recommend the additional CFI resources listed below: A free, comprehensive best practices guide to advance your financial modeling skills, Financial Modeling & Valuation Analyst (FMVA), Commercial Banking & Credit Analyst (CBCA), Capital Markets & Securities Analyst (CMSA), Certified Business Intelligence & Data Analyst (BIDA), Financial Planning & Wealth Management (FPWM). Username * E-Mail * Password * Confirm Password * Captcha * 33:5-33+11*3-11:3 = ? Before receiving payment, the seller may post these revenues in an asset account, such as Accounts Receivable. d) Adjustments involve increasing both an expense and a liability account. What would be the journal entry on January 31 that reflects this? (Check all that apply.) Record the amount paid by the customer. Determine which of the following transactions may require adjustments. b) The adjusted balance is computed by taking that account's amount from the Unadjusted Trial Balance column and adding or subtracting adjustments. At the end of January, the total value of the services provided to Mr. Y is $15,000. The next step is to record the amount paid by the customer as a journal entry. c) Debit Interest expense for $30. (Check all that apply.). Note that when the delivery of goods or services is complete, the revenue recognized previously as a liability is recorded as revenue (i.e., the unearned revenue is then earned). Enter the unadjusted trial balance. 3. Accrual basis accounting recognizes __________ when earned and records __________ when _________ in order to adhere to the matching principle. As of December 31, none of this interest had been received or recorded. a) Debit Catering revenue for $600. should be recorded when goods or services are provided to customers at an amount expected to be received. Review the following statements and determine which is (are) correct regarding an adjusted trial balance and how it is used In preparing financial statements. Some common unearned revenue situations include subscription services, gift cards, advance ticket sales, lawyer retainer fees, and deposits for services. Demonstrate the required journal entry on January 3 by selecting from the choices below. On June 30, Sharper Corporation's stockholders' equity section of its balance sheet appears as follows before any stock dividend or split. -Equipment was purchased in the middle of the year. Multiple select question. Riverbed Company Worksheet For the Month Ended June 30, 2019 Trial Balance Account Titles Dr. Cr. journalize Which of the following accounts would be considered a prepaid expense or prepaid asset account? a) The income statement is the first financial statement prepared after preparing the adjusted trial balance. Then, use the words and their definitions to create a matching quiz. d) Debit Service revenue for $400. -The adjusted trial balance is used to prepare financial statements. -They refer to earnings which have been earned but not yet billed. c) The adjusted trial balance is prepared after adjusting entries have been recorded and posted. $1,000 of supplies were purchased at the beginning of the month. (Check all that apply.). -They are also called deferred revenues. -It is a tangible long-term asset. Explain what unearned revenues are by choosing the correct statement below. prepare financial statements. $1,000 of cash was received in advance of performing services. Which of the following refers to the preparation of an adjusted trial balance? (Check all that apply.) The process is simple in cash basis . For the current year, Bubbles Office Supply had earned $600 of interest on investments. b) Any unused portion of the prepayment still existing at the end of the period will be transferred to the Unearned rent account. -They refer to revenues that are earned in a period, but have not been received and are unrecorded. b) Utilities expense; Cash; Owner, Capital A depreciation adjustment would include a debit to ______ (depreciation expense/accumulated depreciation/building) and ______(debit/credit) to ____depreciation expense/accumulated depreciation/building). This principle is a major part of the _________ process. c) If prepaid expense was initially recorded as an asset, then net income will be lower. Explain what unearned revenues are by choosing the correct statement below. Calculate the amount of interest to accrue if the loan has been outstanding for 45 days. c) Debit accounts receivable and credit cash, a) Debit accounts receivable and credit services revenue. (Check all that apply. b) Debit Unearned revenue for $600. c) Unearned revenues refer to customer payments which have not yet been received. c) Cash, building, equipment Accounts receivable is not involved. Explain what unearned revenues are by selecting the statements below which are correct. Multiple select question. \text{Total stockholders' equity}&\underline{\underline{\text{\$1,360,000}}}\\ B. To Unearned revenues refer to income reported on the income. The company immediately debited the Insurance expense account. (Check all that apply.) Supplies would be credited for $200. Unearned revenue, also known as deferred revenue, is a customer's advance payment for a product or service that has yet to be provided by the company. 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