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Question(s) / Instruction(s):

19. A liability—revenue account relationship exists with an unearned rent revenue adjusting entry.

20. The balances of the Depreciation Expense and the Accumulated Depreciation accounts should always be the same.

21. Unearned revenue is a prepayment that requires an adjusting entry when services are performed.

22. Asset prepayments become expenses when they expire.

23. A contra asset account is subtracted from a related account in the balance sheet.

24. If prepaid costs are initially recorded as an asset, no adjusting entries will be required in the future.

25. The cost of a depreciable asset less accumulated depreciation reflects the book value of the asset.

26. Accrued revenues are revenues that have been earned and received before financial statements have been prepared.

27. Financial statements can be prepared from the information provided by an adjusted trial balance.

a28. The adjusting entry at the end of the period to record an expired cost may be different depending on whether the cost was initially recorded as an asset or an expense.

a29. Rent received in advance and credited to a rent revenue account which is still unearned at the end of the period, will require an adjusting entry crediting a liability account for the amount still unearned.

a30. An adjusting entry requiring a credit to Insurance Expense indicates that the initial transaction was charged to an asset account.

The following questions are from the Study Guide.

s31. The matching principle requires that expenses be matched with revenues.

s32. In general, adjusting entries are required each time financial statements are prepared.

s33. Every adjusting entry affects one balance sheet account and one income statement account.

s34. The Accumulated Depreciation account is a contra asset account that is reported on the balance sheet.

s35. Accrued revenues are amounts recorded and received but not yet earned.

s36. An adjusted trial balance should be prepared before the adjusting entries are made.

as37. When a prepaid expense is initially debited to an expense account, expenses and assets are both overstated prior to adjustment.

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