ch03tif_3 - CHAPTER 3 Measuring Business Income The...

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Chapter 15 / Exercise EX15-5
Managerial Accounting
Warren/Tayler
Expert Verified
CHAPTER 3Measuring Business Income: The Adjusting ProcessLEARNING OBJECTIVES1.Distinguish accrual-basis accounting from cash-basis accounting.2.Apply the revenue and matching principles.3.Make adjusting entries.4.Prepare an adjusted trial balance.5.Prepare the financial statements from the adjusted trial balance.A1.Account for a prepaid expense recorded initially as an expense.A2.Account for an unearned (deferred) revenue recorded initially as a revenue.TRUE/FALSE1.Accrual-basis accounting results in a more accurate measurement of net income than does the cash basis.
L.O. 1EasyPage: 92 2.Under the accrual-basis of accounting, revenues are recorded when a service is performed.
L.O. 1EasyPage: 923.The revenue principle deals with recording expenses incurred to earn revenue in the same period the revenue is recorded.
L.O. 2ModeratePage: 944.The matching principle is closely related to the cash basis of accounting.
L.O. 2ModeratePage: 955.The adjusting entry to record $500 of expired insurance would include a debit to prepaid insurance.
L.O. 3ModeratePage: 986.The adjusting entry to record $400 of earned revenue received in advance would include a debit to a revenue account.
L.O. 3ModeratePage: 1047.Adjusting entries only involve balance sheet accounts.
L.O. 3EasyPage: 978.The adjusting entry to record accrued salaries includes a debit to salary expense.55
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Managerial Accounting
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Chapter 15 / Exercise EX15-5
Managerial Accounting
Warren/Tayler
Expert Verified
TrueL.O. 3EasyPage: 1039.Failure to adjust for an accrued expense will understate expenses and overstate net income.
L.O. 3DifficultPage: 10410.Failure to adjust for accrued revenue results in net income being understated and assets being overstated.False
L.O. 3DifficultPage: 10411.The process of allocating the cost of plant assets to expense over their useful lives is called deferred revenue.
L.O. 3EasyPage: 10012.Every adjusting entry affects an account on the income statement and an account on the balance sheet.
ModeratePage: 9713.The cost of a plant asset less its accumulated depreciation is referred to as book value.
ModeratePage: 10114.The adjusted trial balance includes all accounts contained in the ledger with updated, adjusted balances.True
L.O. 4EasyPage: 10815.The financial statements will contain errors if they are prepared before the adjusting entries are completed.
L.O. 5EasyPage: 10816.The income statement should be prepared before the balance sheet is prepared.
L.O. 5EasyPage: 10917.Capital on the adjusted trial balance represents capital at the beginning of the accounting period.
ModeratePage: 10818.A prepaid expense recorded initially as an expense is adjusted by debiting the asset account.TrueL.O. A1
DifficultPage: 9819.When a prepaid expense is recorded initially as an expense, the adjusting entry transfers the unused portion of the expense to an asset account.

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