Answered: As prepaid assets are used to generate…

As prepaid assets are used to generate revenue, an adjustment is necessary to reduce the previously recorded prepaid asset and reduce the related expense. True or False?

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter9: Auditing The Revenue Cycle

Section: Chapter Questions

Problem 3TFQ

See similar textbooks

Related questions

Q: Preparation of adjusting entry for depreciation is supported by which principle/concept/assumption?…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: 1)If an asset value recovers after an impairment loss has been recognized for the asset, what amount…

A: Since, you have posted more than one question, we will answer the first question for you. If you…

Q: Which of the following events could not coincide with the recognition of an expense? O The…

A: Expenses means the amount spent on running the business. Expense will decrease our profits and shown…

Q: which metric is used as the profitability metric and explain what it evaluate?

A: Profitability Matric is somewhere helps to analyse the financial performance and financial position…

Q: Which of the following items may be classified as nonoperating revenues and expenses? Multiple…

A: Non-operating revenues and outlays are those incomes and expenses that are earned or incurred from…

Q: Explain is a change in depreciation method a change in accounting principle, or is it a change in…

A: According to the Accounting Standard 1- the change in the method of depreciation is a change in the…

Q: Depreciation does not involve movement of cash, therefore unnecessary in accounting for an entity’s…

A: Depreciation means allocation of the cost of the asset over the useful life of the asset. This is…

Q: Which of the following statements related to long-lived assets is true? Depreciation is…

A: Depreciation : Depreciation is an accounting method of allocating the cost of a tangible or…

Q: There are various types of accounting changes, each of which is required to be reported…

A: Depreciation: Depreciation refers to the reduction in the monetary value of a fixed asset due to its…

Q: Given the dual effects of accountable events, an decrease in an asset cannot possibly be accompanied…

A: Assets = Liabilities + Stockholders equity Every transaction has dual effect . The question is…

Q: When an impairment loss occurs, the carrying amount of the asset should be reduced to its a) ©…

A: Impairment: It implies to an increase in the fixed asset's carrying value in relation to the price…

Q: under the cost recovery method of revenue recognition, a. Income is recognized immediately b. Income…

A: Cost recovery method of recognition of revenue is used when there exists substantial doubt regarding…

Q: Using practical example discuss why current asset is not seen not part of the income statement

A: Answer: As per Q/A guidelines, first question is answered. Please repost the question to be answered…

Q: If there is a change from double declining balance to straight line method xThe accumulated…

A: Solution: Accounting for Change in depreciation method is based on change in accounting principal…

Q: Statement 1: The cost of an asset, or other amount substituted for cost, less its residual value is…

A: An asset can only be depreciated up to the level of residual value. When it reaches the residual…

Q: Which of the following is correct when recording the disposal of equipment for a gain? Group of…

A: Introduction: Journals: Recording of a business transactions in a chronological order. First step in…

Q: Loss contingencies are usually recognized in the income statements of the period when a.…

A: Solution; Loss contingencies are usually recognized in the income statements of the period when…

Q: If an asset that is not fully depreciated is sold or disposed, but the fixed asset records are not…

A: Fixed Asset: The asset used by company for more than one year is known as fixed asset. Fixed asset…

Q: Question 1 Which of the following is not correct in relation to the reversal of an impairment loss…

A: Step 1 Impairment of the assets means the downward revaluation of the assets; whenever the carrying…

Q: The gain on impairment loss reversal of an asset which is recognized in profit or loss is computed…

A: The loss of impairment is recognized in the income account and the reversal of the impairment loss…

Q: Accounting Which statement is false? Accounting for asset retirement obligations (ARO) apply to both…

A: The given question asked about the correctness of the statement. Assets retirement obligations:…

Q: When it is probably that future economic benefits associated with an asset will flow to the entity,…

A: Accounting standard 1 deals with the disclosure of accounting policies which states that the company…

Q: Which of the following is Not correct An increase in a liability may result in a decrease in owner's…

A: The accounting equation is known as the equation that describes the transaction in accounting form.…

Q: When do we apply depletion in accounting? Discuss its use. What is the difference between…

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Give an example of a transaction that results in: a. A decrease in an asset and a decrease in a…

A: Transaction analysis: Transaction analysis is an economic event that causes impact on the value of…

Q: How should acquisition related costs such as due diligence and legal costs be accounted for?…

A: As per IFRS3, Acquisition costs such as Advisory cost, Accounting, and due diligence cost, Legal…

Q: ses, companies can use the MACRS depreciation method. B When you change a depreciation estimate,…

A: Answer: Option (A) is Wrong.

Q: Record the entry to adjust asset values to fair value.

A: In this problem assets are revalued at a gain. So the gain i.e difference…

Q: Would a change from straight line depreciation to double declining balance be a change in accounting…

A: Accounting changes: When a company requires to sacrifice the consistent accounting methods and…

Q: Under the historical accounting system, depreciation is calculated on the original cost of fixed…

A: The question is multiple choice question. Required Choose the Correct Option.

Q: Occasionally, events occur that change an asset's value after purchase. Which of the following is…

A: Solution: "Reductions in asset value are recognized" is true regarding these changes in value. This…

Q: Under IFRS, the initial revaluation of equipment when book value exceeds fair value results in a. An…

A: As per International Financial Reporting Standards (IFRS), the company values the property, plant…

Q: Which of the following is not true in regard to selling fixed assets? a.If the selling price is more…

A: The journal entry for sale of fixed asset Cash A/C dr (sale amount) Loss on sale (if bookvalue >…

Q: The amount of asset cost assigned as an expense to a particular period is called: a. Depreciation b.…

A: Introduction: Income statement: All revenues and expenses are shown in Income statement. It tells…

Q: Which of the following would not be an adjustment to net income using the indirect method? Group of…

A: The cash flow statement using indirect method starts with net income and adjusts for non cash items…

Q: Which statement below best describes when to record an expense? When the expense is paid. When…

A: The income statement is prepared to record revenue and expenses incurred during the period.

Q: In depreciating the cost of an asset, accountants are most concerned witha. Conservatism.b.…

A: Depreciation: Depreciation refers to the reduction in the monetary value of a fixed asset due to…

Q: In determining the value in use, which of the following cash flow is excluded from the computation?…

A: As per provisions of IFRS, the value in use is used for the purpose of impairment of asset. If the…

Q: What is an impairment loss? A ) The amount by which the carrying amount of an asset exceeds the…

A: An impairment loss is a recognized decrease in the par value of an asset caused by a deterioration…

Q: Accounting is not as precise and objective as it is sometimes portrayed as being. There are areas…

A: Depreciation Expense is nothing but an apportionment of cost of fixed assets that are appropriate to…

Q: Sometimes, for the fixed assets of certain businesses, the balance in Accumulated Depreciation is…

A: Depreciation means the loss in value of assets because of usage of assets , passage of time or…

Q: The accrual basis of accounting requires matching of costs to revenues.

A: Meaning Property, plant, and equipment are long-term assets vital to business operations and not…

Q: Which accounting concepts requires non-current assets to be valued at cost less accumulated…

A: The accounting involves various principles on which business runs in long term or short term.

Concept explainers

Contingent Liabilities and Provisions

A contingent liability can be defined as a liability the occurrence of which is dependent upon the happening of an uncertain future event. It is generally recorded in the books only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly.

Question

As prepaid assets are used to generate revenue, an adjustment is necessary to reduce the previously recorded prepaid asset and reduce the related expense.

True or False?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Accounting for Current liabilities, Provisions and Contingencies

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

In practice, would you expect the depreciation expense for a non-current asset to be overestimated or underestimated? Explain why this is the case.
Which one of the following is not one of the factors in computing depreciation? Cost price Inadequacy Salvage value Exchange price Which of the following account is debited when account payable is converted into note payable? 直

Expense Recoognition: What does it mean when assets are "expensed"? Why do costs do not qualify as an asset? Explain, Please.
What is the largest estimated possible loss that could arise in a safe payment schedule? no need to explain a. Book value of recorded assets b. Book value of recorded non cash assets c. Fair value of recorded assets d. Any of the above
Depreciation is needed only for computing income taxes. True or false?
Which of the following is a false statement regarding revaluation of PPE?A. Revalued amount is either fair value or depreciated replacement cost.B. If simultaneous revaluation is not possible, revaluation can be done on arolling basis provided revaluation of the class of assets is completed withina short period of time and provided the revaluations are kept up to date.C. The difference between the PPE’s carrying amount and its revalued amount isknown as revaluation surplus and should be presented in the statement ofcomprehensive income, net of applicable tax.D. When an asset's carrying amount is increased as a result of revaluation, theincrease shall always be credited to revaluation surplus regardless of theexistence of previous impairment loss recognized. Which of the following should be included as cost of inventory?A. Depreciation expense of the delivery equipment.B. Depreciation expense of the factory machinery.C. Storage cost of finished goods.D. None from the choices. In…
Which of the following observations refers to the term differential? Select one: a. Excess of investment amount over fair value of net assets b. Excess of Investment amount over book value net assets c. Excess of fair value over book value of net assets d. Excess of fair value over historical cost of assets
Record the entry to adjust asset values to fair value. Record the entry to reduce additional paid in capital balance to correct figure, to close out gain account, and to eliminate deficit. How do I do this? What part of this is the adjust asset value and what part is the deficit entry
Which of the following is INCORRECT regarding depreciation? Select one: O a. It is not a matter of valuation. O b. It is a means of cost allocation. Oc. O d. It is an attempt to reflect the fair market values of the related assets. It is part of the matching of revenues and expenses.
Which of the following statements about capitalizing costs is correct?A. Capitalizing costs refers to the process of converting assets to expenses.B. Only the purchase price of the asset is capitalized.C. Capitalizing a cost means to record it as an asset.D. Capitalizing costs results in an immediate decrease in net income.
Accounting depreciation is sometimes referred to more generally as asset depreciation. True or false?
Which sentence is incorrect? Select one: a. Depreciation is not the actual change in the value of the asset. b. Accumulated Depreciation account has effects on the cash flow statement. c. Accumulated Depreciation is called a contra asset account. d. Depreciation is the process of allocating the cost of an asset to expense, not a valuation process.