3 - 38\ 8 CHAPTER 3 Adjusting the Accounts Note : All asterisked Questions . Exercises , and Problems relate to material in the appendices to the

Why do accrual basis financial statement provide more useful information than cash basis statement?

3 - 38\8 CHAPTER 3 Adjusting the AccountsNote : All asterisked Questions . Exercises , and Problems relate to material in the appendices to the chapter*Questions1 . 2 . How does the time period assumption affect an accountant's17 . On January 9 , a company pays $5, 000 for salaries and wages ofanalysis of business transactions ?\which $2,000 was reported as Salaries and Wages Payable on Decem-b . Explain the terms fiscal year , calendar year , and interim periods .ber 31 . Give the entry to record the payment .\2 . Define two generally accepted accounting principles that relate to18 . For each of the following items before adjustment , indicate theadjusting the accounts .type of adjusting entry ( prepaid expense , unearned revenue , accrued3 . Susan Hardy , a lawyer , accepts a legal engagement in March ,revenue , or accrued expense ) that is needed to correct the misstate -performs the work in April , and is paid in May . If Hardy's law firmment . If an item could result in more than one type of adjusting entry*prepares monthly financial statements , when should it recognizeindicate each of the types .2 . Assets are understated .d . Expenses are understated .revenue from this engagement ? Why ?\4 . Why do accrual -basis financial statements provide more usefulb . Liabilities are overstated .. . Assets are overstated .information than cash - basis statements ?"C . Liabilities are understated .f . Revenue is understated .5 . In completing the engagement in Question 3 , Hardy pays no costs19. One- half of the adjusting entry is given below . Indicate the accountin March , $2,000 in April , and $2 , 500 in May ( incurred in April ) .title for the other half of the entry .How much expense should the firm deduct from revenues in the2 . Salaries and Wages Expense is debited .month when it recognizes the revenue ? Why ?`b . Depreciation Expense is debited .6 . " Adjusting entries are required by the historical cost principle ofC . Interest Payable is credited .accounting . " Do you agree ? Explain .d . Supplies is credited .\7 . Why may a trial balance not contain up - to - date and complete finan -e . Accounts Receivable is debited .cial information ?f . Unearned Service Revenue is debited .8. Distinguish between the two categories of adjusting entries , and20. " An adjusting entry may affect more than one balance sheet oridentify the types of adjustments applicable to each category .income statement account . " Do you agree ? Why or why not ?9 . What is the debit / credit effect of a prepaid expense adjusting entry ?21 . Why is it possible to prepare financial statements directly from10. " Depreciation is a valuation process that results in the reportingan adjusted trial balance ?"of the fair value of the asset . " Do you agree ? Explain .$ 22 . Dashan Company debits Supplies Expense for all purchases of11 . Explain the differences between depreciation expense and accu -supplies and credits Rent Revenue for all advanced rentals . For eachmulated depreciation .type of adjustment , give the adjusting entry .\12 . G. Phillips Company purchased equipment for $18 , 000 . By the* 23 . 2 . What is the primary objective of financial reporting ?current balance sheet date , $6, 000 had been depreciated . Indicate theb . Identify the characteristics of useful accounting information .balance sheet presentation of the data .$ 24 . Dan Fineman , the president of King Company , is pleased . King13 . What is the debit/ credit effect of an unearned revenue adjustingsubstantially increased its net income in 2020 while keeping its unit ;ventory relatively the same . Howard Gross , chief accountant , cauticentry ?Dan , however . Gross says that since King changed its method of14 . Whistler Corp . performed services for a customer but has not yetventory valuation , there is a consistency problem and it is difficultrecorded payment , nor has it recorded any entry related to the work .determine whether King is better off . Is Gross correct ? Why or whyWhich of the following accounts are involved in the adjusting entry :"* 25 . What is the distinction between comparability and consisted( a ) asset , ( b ) liability , ( c ) revenue , or ( d ) expense ? For the accountsselected , indicate whether they would be debited or credited in the* 26 . Describe the constraint inherent in the presentation of acing information .entry .15 . A company fails to recognize an expense incurred but not paid . In -$ 27 . Quinn Becker is president of Better Books . She has nodicate which of the following accounts is debited and which is crediteding background . Becker cannot understand why fair value isIn the adjusting entry : ( a ) asset , ( b ) liability , ( C ) revenue , or ( d ) expense .as the basis for all accounting measurement and reporting .16 . A company makes an accrued revenue adjusting entry for $900$ 28 . What is the economic entity assumption ? Give an exaInd an accrued expense adjusting entry for $700 . How much was netviolation ."come understated prior to these entries ? Explain .Brief ExercisesBE3 . 1 ( LO 1 ) The ledger of Althukair Company includes the following accounts . EXdicare why adjusting entries areaccount may require adjustment .C. Unearned Service Revenue .Lance.Interest Payable .