Deck 4: The Accounting Cycle Continued: Preparing Worksheets and Financial Statements

Question 1

Matt's Engineering purchased a truck for $60,000 with a residual value of $17,000 and a life expectancy of 8 years. Using straight-line depreciation, the amount of the depreciation adjustment for the first year would be

A) $5,375.
B) $7,500.
C) $2,687.
D) $2,125.

Answer 1

A

Question 2

Not recording the Prepaid Rent used causes

A) assets to be too high.
B) assets to be too low.
C) expenses to be too high.
D) revenue to be too high.

Answer 2

A

Question 3

If the balance of supplies on hand account at the end of the period was $550 and you counted $250 on hand, the amount for the adjustment for Supplies expense would be

A) $300.
B) $800.
C) $250.
D) $550.

Answer 3

A

Question 4

The adjustment that is made to allocate the cost of a building over its expected life is called

A) depreciation.
B) residual value.
C) accumulated depreciation.
D) None of these answers are correct.

Question 5

A contra-asset is

A) in reality a liability.
B) an asset with a debit balance.
C) an account with an opposite balance of a normal asset.
D) an account that increases the asset.

Question 6

When historical cost is used in the accounting records, the book value of the asset is

A) the original cost.
B) the market value.
C) original cost less accumulated depreciation.
D) appraised value.

Question 7

After the adjustment for depreciation has been made, the original cost of the equipment

A) increases with a credit.
B) decreases with a debit.
C) remains the same.
D) None of these answers are correct.

Question 8

If the Office Supplies account is not adjusted,

A) assets will be overstated and expenses will be understated.
B) assets will be overstated and expenses will be overstated.
C) assets will be understated and expenses will be overstated.
D) assets will be understated and expenses will be understated.

Question 9

An adjustment for Prepaid Rent would indicate

A) the amount originally paid.
B) the amount expired.
C) the amount on hand.
D) the amount of the trial balance.

Question 10

If Prepaid Rent for the period is not adjusted,

A) assets will be overstated and expenses will be overstated.
B) assets will be overstated and expenses will be understated.
C) assets will be understated and expenses will be overstated.
D) assets will be understated and expenses will be understated.

Question 11

A form used to organize and check data before preparing financial reports is known as a(n)

A) trial balance.
B) income statement.
C) balance sheet.
D) worksheet.

Question 12

Accountants use the worksheet to organize and complete adjustments for all but one of the following events:

A) Depreciation on equipment.
B) Revenue earned and recorded in the current period.
C) Supplies on hand.
D) Rent paid in advance.

Question 13

If the adjustment for Supplies used during the period was not made,

A) expenses would be too low.
B) assets would be too low.
C) expenses would be too high.
D) revenue would be too high.

Question 14

The cost of an asset less accumulated depreciation equals

A) residual value.
B) book value.
C) depreciation expense.
D) None of these answers are correct.

Question 15

Bringing account balances up to date before preparing financial reports is called

A) posting.
B) adjusting.
C) journalizing.
D) analyzing.

Question 16

As Prepaid Rent is used, the asset becomes a(n)

A) liability.
B) expense.
C) contra-asset.
D) revenue.

Question 17

Which of the following would be an example of a contra-asset?

A) Depreciation Expense
B) Residual Value
C) Accumulated Depreciation
D) Supplies

Question 18

The adjustment to record supplies used during the period would be

A) debit Supplies; credit Supplies Expense.
B) debit Supplies Expense; credit Cash.
C) debit Supplies Expense; credit Supplies.
D) debit Supplies; credit Cash.

Question 19

When historical cost is used to record equipment, it would appear as the

A) original cost on the balance sheet.
B) market value on the balance sheet.
C) residual value on the balance sheet.
D) original cost on the income statement.

Question 20

Prepaid Rent is considered to be a(n)

A) liability.
B) asset.
C) contra-asset.
D) revenue.

Question 21

Kiran's Safety Training Academy purchased a one-year insurance policy for $3,600. The adjusting entry for one month would include

A) a debit to Insurance Expense, $300.
B) a credit to Cash, $300.
C) a debit to Prepaid Insurance, $300.
D) a credit to Insurance expense, $300.

Question 22

Huron Road Tours showed store supplies on hand to be $450. If at the end of the period supplies used were $100, the adjusting entry would include

A) a debit to Supplies Expense for $100.
B) a debit to Supplies Expense for $350.
C) a credit to Supplies Expense for $100.
D) a credit to Supplies Expense for $350.

Question 23

Total wages per week are $6,700. You need to accrue $4,020 of wages at period end. The adjusting entry would include which of the following?

A) Credit Wages Expense, $4,020; debit Accrued Wages, $4,020
B) Debit Wages Expense, $4,020; credit Accrued Wages, $4,020
C) Debit Wages Expense, $2,680; credit Accrued Wages, $2,680
D) Debit Wages Expense, $2,680; credit Cash, $2,680

Question 24

As accumulated depreciation is recorded, the book value

A) increases.
B) decreases.
C) remains the same.
D) is closed out.

Question 25

Juliet Dance Academy estimated depreciation on its building at $400. The adjusting entry for depreciation of the building would include

A) a debit to Accumulated Depreciation for $400.
B) a debit to Depreciation Expense for $400.
C) a credit to Building for $400.
D) a credit to Depreciation Expense for $400.

Question 26

Accumulated Depreciation is found on which of the following financial statements?

A) Balance sheet
B) Income statement
C) Statement of Owner's Equity
D) All of these answers are correct.

Question 27

Bob's Bakery purchased an industrial oven for $22,000 with a residual value of $6,000 and a life expectancy of 8 years. Using straight-line depreciation, the amount of the depreciation adjustment for the first year would be

A) $1,000.
B) $8,000.
C) $2,000.
D) $4,000.

Question 28

The adjusted trial balance on the worksheet shows Accumulated Depreciation, $1,000, and Depreciation Expense, $700. What was the balance in the Accumulated Depreciation account before the adjustment?

A) $1,700
B) $300
C) $700
D) $1,000

Question 29

Walter's Windows showed supplies available during the year of $1,700. A count of the supplies on hand as of October 31 is $600. The adjusting entry for Store Supplies expense would include

A) a debit to Store Supplies Expense for $600.
B) a credit to Store Supplies Expense for $600.
C) a debit to Store Supplies for $1,100.
D) a debit to Store Supplies Expense for $1,100.

Question 30

The adjustment for wages earned, but not yet paid is

A) Debit Wages Expense, credit Cash.
B) Debit Accrued Wages, credit Wages Expense.
C) Debit Accrued Wages, credit Cash.
D) Debit Wages Expense, credit Accrued Wages.

Question 31

On November 1, Juan paid $24,000 in advance for a year's rent. The November 30 adjusting entry for rent expense should include

A) a debit Rent Expense, $24,000.
B) a credit Prepaid Rent, $24,000
C) a debit Rent Expense, $2,000.
D) a credit Cash, $2,000.

Question 32

Great Lakes Modeling Agency purchased $800 of scanning equipment at the beginning of the month. This account had no opening balance. Depreciation Expense on this item for the month is $200. What is the balance of the scanning equipment account at the end of the month?

A) $600
B) $1,000
C) $200
D) $800

Question 33

The estimated value of an item at the end of its useful life is

A) depreciation expense.
B) residual value.
C) accumulated depreciation.
D) None of these answers are correct.

Question 34

Liam's Skate Sharpening estimated depreciation for office equipment at $200. The adjusting entry would include

A) a debit to Accumulated Depreciation for $200.
B) a credit to Depreciation Expense for $200.
C) a credit to Accumulated Depreciation for $200.
D) a credit to Office Equipment for $200.

Question 35

To record accrued salaries, you would

A) debit Cash and credit Accrued Salaries.
B) debit Accrued Salaries and credit Salaries Expense.
C) debit Salaries Expense and credit Accrued Salaries.
D) None of these answers are correct.

Question 36

Residual value is the

A) estimated value of the asset when it is purchased.
B) estimated value of the asset at the end of its useful life.
C) cost of the asset.
D) allocation of the cost.

Question 37

What type of account is Accrued Salaries?

A) Asset
B) Expense
C) Liability
D) Owner's equity

Question 38

Hope for the Homeless purchased kitchen equipment for $47,000 with a residual value of $17,000 and a life expectancy of 5 years. Using straight-line depreciation, the amount of the depreciation adjustment for the first year would be

A) $5,000.
B) $6,000.
C) $6,400.
D) $4,000.

Question 39

Depreciation Expense would be found on which of the following financial statements?

A) Balance sheet
B) Income statement
C) Statement of Owner's Equity
D) Depreciation report

Question 40

Sarah's Spices' accrued wages are $1,700. Which of the following is the required adjusting entry?

A) Debit Salaries Expense, $1,700; credit Accrued Salaries, $1,700
B) Credit Salaries Expense, $1,700; debit Accrued Salaries, $1,700
C) Debit Cash, $1,700; credit Salaries Expense, $1,700
D) Debit Accrued Salaries, $1,700; credit Cash, $1,700

Question 41

Which of the following accounts would most likely be depreciated?

A) Equipment
B) Office Supplies
C) Cash
D) Accounts Payable

Question 42

The entry to record the expiration of part of the prepaid rent will

A) decrease total assets and increase total expenses at the end of the month.
B) decrease total assets and decrease total expenses at the end of the month.
C) increase total assets and increase total expenses at the end of the month.
D) increase total assets and decrease total expenses at the end of the month.

Question 43

Which of the following is most likely to result in an adjusting entry at the end of the period?

A) Payment of two months' insurance in advance
B) Payment of one month's rent
C) Owner's withdrawals
D) Payment for routine maintenance on the company van

Question 44

When making the adjustment for prepaid insurance, instead of writing off only the time that has passed the entire policy was written off. This would

A) overstate the assets.
B) overstate the liabilities.
C) understate net income.
D) None of these are correct.

Question 45

The accrual of an expense was not recorded. This would

A) overstate expenses and overstate liabilities.
B) overstate expenses and understate liabilities.
C) understate expenses and overstate liabilities.
D) understate expenses and understate liabilities.

Question 46

Historical cost is the same as

A) residual value.
B) original cost.
C) accumulated depreciation.
D) book value.

Question 47

All of the following are reasons to adjust the account balances at the end of the period EXCEPT

A) to accurately report the assets on the balance sheet.
B) to report all revenues earned during the period.
C) to report all expenses incurred during the period.
D) to correct any errors made during the period.

Question 48

Which of the following transactions would result in an accrual?

A) Salary expense has been incurred but unpaid
B) Rent expired for the month
C) Supplies used during the accounting period
D) Equipment depreciated over the period

Question 49

The adjustment for accrued wages included the entire pay period, some of which occurs next month. This would

A) understate the liabilities.
B) overstate the liabilities.
C) overstate net income.
D) None of these are correct.

Question 50

Adjusting entries affect

A) the balance sheet.
B) the income statement.
C) Neither of these answers is correct.
D) Both A and B are correct.

Question 51

Adjusting the supplies on hand account will

A) decrease the total assets and increase the total expenses.
B) decrease the total assets and decrease the total expenses.
C) increase the total assets and increase the total expenses.
D) increase the total assets and decrease the total expenses.

Question 52

Bailey's received its electric bill for December on December 31 but did not pay nor record it in the general journal. This resulted in

A) understated assets.
B) overstated net income.
C) overstated liabilities.
D) understated capital.

Question 53

Depreciation of equipment was recorded twice this period. This would

A) overstate expenses and overstate assets.
B) overstate expenses and understate assets.
C) understate expenses and overstate assets.
D) understate expenses and understate assets.

Question 54

Equipment with a cost of $150,000 has an accumulated depreciation of $50,000. What is the book value of the equipment?

A) $150,000
B) $50,000
C) $200,000
D) $100,000

Question 55

Online Service received its telephone bill for January, but is not going to pay the bill until February. What adjustment is needed to record the receipt of the bill?

A) Debit Telephone Expense; credit Cash
B) Debit Accounts Payable; credit Telephone Expense
C) Debit Telephone Expense; credit Accounts Payable
D) Debit Accounts Payable; credit Cash

Question 56

It's the end of the accounting period and no electric bill has been received (but the expense has been incurred); you should record an entry that

A) increases the total assets and increases the total expenses.
B) decreases the total assets and increases the total expenses.
C) increases the total liabilities and increases the total expenses.
D) decreases the total liabilities and increases the total expenses.

Question 57

Equipment with a cost of $150,000 has an accumulated depreciation of $50,000, and an estimated remaining life of 8 years. What is the annual straight-line depreciation expense for the equipment?

A) $12,500
B) $25,000
C) $50,000
D) $100,000

Question 58

The adjustment for depreciation was credited to Equipment and debited to Depreciation Expense. This would

A) overstate the assets.
B) understate the assets.
C) overstate net income.
D) None of these are correct.

Question 59

Equipment with a cost of $150,000 has an accumulated depreciation of $50,000, and an estimated remaining life of 8 years. What is the historical cost of the equipment?

A) $150,000
B) $50,000
C) $200,000
D) $100,000

Question 60

Which of the following accounts would most likely NOT need to be adjusted at the end of the year?

A) Office Supplies
B) Prepaid Rent
C) Accumulated Depreciation
D) Cash

Question 61

Rent paid by your organization two months in advance is considered to be a(n)

A) liability.
B) asset.
C) contra asset.
D) revenue.

Question 62

Original cost of equipment is not adjusted on the worksheet.

Question 63

The worksheet is a formal statement.

Question 64

Which of the following would cause a liability to be credited and an expense to be debited?

A) Recording the adjustment for the expiration of rent
B) Recording the depreciation of equipment
C) Recording the accrual of salaries incurred
D) Purchasing equipment

Question 65

Canada Revenue Agency uses the term Capital Cost Allowance which is almost identical to

A) contra accounts.
B) depreciation.
C) book value.
D) salaries.

Question 66

The amount of supplies used during the period would be shown in the adjustment columns of the worksheet.

Question 67

Assuming that purchases of supplies were debited to the Supplies asset account when made, an adjustment for supplies would indicate

A) the amount bought.
B) the amount used up.
C) the amount on hand.
D) the amount on the trial balance.

Question 68

Which of the following would cause total assets to decrease and total expense to increase?

A) Recording the depreciation of equipment
B) Recording the consumption of supplies
C) Recording the expiration of prepaid rent
D) All of the above would have that effect.

Question 69

Accumulated Depreciation is a contra-asset account found on the balance sheet.

Question 70

The depreciation of equipment will require an adjustment that results in

A) total assets increasing and total expenses increasing.
B) total assets increasing and total expenses decreasing.
C) total assets and expenses decreasing.
D) total assets decreasing and total expenses increasing.

Question 71

On March 1, Rosetti Company paid in advance $7,000 for seven months' rent. The March 31 adjusting entry for rent expense should include

A) debit Rent Expense, $2,500.
B) credit Prepaid Rent, $3,500.
C) debit Rent Expense, $2,000.
D) debit Rent Expense, $1,000.

Question 72

Deer and Fishing Company owns $6,000 of office furniture. Accumulated Depreciation had a balance of $3,000 before recording this year's depreciation. Depreciation Expense for the current year is $1,000. What is the book value at the end of the year?

A) $3,000
B) $6,000
C) $2,000
D) $1,000

Question 73

Which of the following would cause a contra-asset to be credited and an expense debited?

A) Recording an accrued expense
B) Recording the consumption of supplies
C) Recording the building depreciation
D) All of the above would have that effect.

Question 74

After the adjustment for depreciation has been made, the original cost of the equipment

A) increases with a credit.
B) decreases with a debit.
C) remains the same.
D) is adjusted to market value.

Question 75

Adjustments are necessary to update account balances for internal transactions.

Question 76

The accounts added below the trial balance, on the worksheet, are always decreasing.

Question 77

An important function of the worksheet is to assist the accountant in finding and correcting errors before the financial statements are prepared.

Question 78

If a truck cost $13,000, has a residual value of $1,000, and has a useful life of 10 years, the depreciation for a month would be

A) $1,200.
B) $108.33.
C) $1,300.
D) $100.

Question 79

It is the year end, but not the pay period end. How will this affect the balance sheet?

A) Assets will be increased.
B) Liabilities will be increased.
C) Owner's equity will be increased.
D) This has no effect on the period end balance sheet.

Question 80

At the start of this year 18 months rent was paid. At the year's end, how will this affect the balance sheet?

A) Assets will be decreased.
B) Liabilities will be increased.
C) Owner's equity will be increased.
D) This has no effect on the period end balance sheet.