If you have difficulty answering the following questions, learn more about this topic by reading our Adjusting Entries (Explanation). in six months and no payment of interest or principal is to be made until the note is due D Insurance expense $200*3=$600 1. No interest or principal Adjusting entries follows the accrual principle of accounting and make necessary adjustments which are not recorded during the previous accounting year. (b) Supplies used, $300. For multiple-choice and true/false questions, simply press or click on what you think is the correct answer. If you need a refresher course on this topic you can view our basics of bookkeeping tutorials here. on May 31. Prepaid expenses that have not been used up or have not yet expired are reported as assets. He is the sole author of all the materials on AccountingCoach.com. The $2,400 payment was recorded on December 1 with a debit to the current asset Prepaid Insurance and a credit to the current asset Cash. The adjusting entry that reduces the balance in Deferred Revenues or Unearned Revenues will also include which of the following? Problem 2: Problem 3: Problem 4: Problem 5: What type of accounts are Accumulated Depreciation and Allowance for Doubtful Accounts? What is the amount of the debit and the credit? On December 1, your company paid its insurance agent $2,400 for the annual insurance premium covering the twelve-month period beginning on December 1. or Wrong. __________C Prepaid insurance $600. (c) Depreciation on furniture, $275. Here is the process we will follow: Draw two T-accounts. // ]]> The ledger of Piper Rental Agency on March 31 of the current year includes the following selected accounts before adjusting entries have been prepared. For multiple-choice and true/false questions, simply press or click on what you think is the correct answer. Insurance expires at the rate of $200 per month. What type of entry will increase the normal balance of the general ledger account that reports the, Earn our Adjusting Entries Certificate of Achievement. [Stockholders' equity appears on the right side of the accounting equation. On December 4 it purchased $1,500 of supplies on credit and recorded the transaction with a debit to the income statement account Supplies Expense and a credit to the current liability Accounts Payable. Problem 1: At year end, unrecorded interest expense due to creditors was Rs. Nearly all adjusting entries involve a minimum of one balance sheet account and a minimum of one income statement account. What type of accounts are Interest Receivable and Fees Receivable? Want more practice questions?Receive instant access to our graded Quick Tests (more than 1,800 unique test questions) when you join AccountingCoach PRO. At the end of the day on December 31, your company estimated that $700 of the supplies were still on hand in the supply room. On December 1, XYZ Insurance Co. received $2,400 from your company for the annual insurance premium covering the twelve-month period beginning on December 1. As the debit balance in the asset account Prepaid Insurance expires, there will need to be an adjusting entry to 1) debit Insurance Expense, and 2) credit Prepaid Insurance. Today we covered how to adjust different entries in the books of accounts. Which of the following will be included in the adjusting entry to accrue interest income or interest revenues? by Fatima (Philippines) Before you begin: For purposes of testing and exams it's important to make sure you not only answer exercises correctly but do so at the right speed. When interest has been earned but no cash has been received and no billing paperwork has been processed in the accounting records, a company will need to accrue 1) interest revenue or interest income, and 2) an asset such as Interest Receivable. 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