Question 1

The procedure of transferring journal entries to ledger accounts is called:&#10;A) journalizing.&#10;B) ledgering.&#10;C) recording.&#10;D) posting.

Accepted Answer

The procedure of transferring journal entries to ledger accounts is called posting.

Question 2

A business pays weekly salaries of $20,000 on Friday for a five-day week ending on that day. The adjusting entry necessary at the end of the fiscal period ending on Thursday is:&#10;A) debit Salaries Payable, $16,000; credit Cash $16,000.&#10;B) debit Salaries Expense, $16,000; credit Cash $16,000.&#10;C) debit Salaries Expense, $16,000; credit Accounts Payable $16,000.&#10;D) debit Salaries Expense, $16,000; credit Salaries Payable $16,000.

Accepted Answer

The adjusting entry necessary at the end of the fiscal period ending on Thursday is a debit to Salaries Expense for the amount earned by employees during the five-day workweek, which is $16,000 ($20,000 divided by 5 days × 4 days worked) and a credit to Salaries Payable for the same amount. This will reduce the Salaries Expense account to only include the current period's expenses and record the amount owed to employees for the last day of the workweek. Choice A is incorrect because it does not record the amount owed to employees. Choice B is incorrect because it debits the wrong account, Salaries Payable, which is a liability account used to record wages owed but not yet paid. Choice C is incorrect because it credits Accounts Payable, which is not used to record payroll transactions.

Question 3

For which of the following types of adjusting entries are liabilities overstated and revenues understated before the adjusting entry is made?&#10;A) Unearned Revenues.&#10;B) Accrued Revenues.&#10;C) Prepaid Expenses.&#10;D) Accrued Expenses.

Accepted Answer

Before the adjusting entry is made for unearned revenues, the liability is overstated because payment has been received but the revenue has not yet been earned. Additionally, revenues are understated because the revenue has not yet been recognized.

Question 4

Cannus Company signed a $6,000 ninety day note payable on November 1 that bears interest at a rate of 7%. The total interest to be accrued on this note at December 31 is:&#10;A) $35.&#10;B) $70&#10;C) $420.&#10;D) $105.

Accepted Answer

To calculate the interest accrued on the note payable, we need to find the interest for the 61 days between November 1 and December 31.

Interest = Principal x Rate x Time
= $6,000 x 7% x (61/365)
= $70.41

Therefore, the total interest to be accrued on this note at December 31 is approximately $70, which is closest to choice B.

Question 5

A post-closing trial balance contains:&#10;A) real and nominal accounts.&#10;B) permanent and temporary accounts.&#10;C) balance sheet or permanent accounts.&#10;D) balance sheet and retained earnings statement accounts.

Accepted Answer

A post-closing trial balance contains balance sheet or permanent accounts. This type of trial balance is prepared after all the temporary accounts have been closed and the balances have been transferred to the retained earnings account. Therefore, only permanent accounts, which are also known as balance sheet accounts, will be listed on the post-closing trial balance.

Question 6

The book value of a depreciable asset is defined as the asset's:&#10;A) cost less accumulated depreciation.&#10;B) current fair value.&#10;C) replacement cost.&#10;D) cost.

Accepted Answer

The book value of a depreciable asset is calculated as the cost of the asset less accumulated depreciation, which represents the amount of the asset's cost that has been allocated as an expense over its useful life. Therefore, option A is the correct answer. Option B, the current fair value, is not used in the calculation of book value. Option C, replacement cost, is not directly related to the historical cost of the asset. Option D simply provides the cost of the asset, which is used in calculating the book value, but the book value is not the same as the cost.

Question 7

What type of relationship exists with an unearned revenue adjusting entry?&#10;A) Receivable/revenue.&#10;B) Liability/revenue.&#10;C) Asset/revenue.&#10;D) Expense/liability.

Accepted Answer

The adjusting entry for unearned revenue involves debiting the liability account and crediting the revenue account. This reflects the fact that the company has received payment for a service or product that has not yet been provided, creating a liability to perform in the future. Therefore, the relationship between unearned revenue and the adjusting entry is liability/revenue.

Question 8

A credit will reduce , but increase .&#10;A) accounts receivable; accounts payable&#10;B) expenses; accounts receivable&#10;C) accounts payable; common stock&#10;D) common stock; prepaid insurance

Accepted Answer

A credit to accounts receivable will reduce the amount owed to the company by its customers, while a credit to accounts payable will increase the amount the company owes to its vendors or suppliers.

Question 9

An accrued expense account represents expenses that have:&#10;A) been used and paid.&#10;B) been paid but not used.&#10;C) not been used or paid.&#10;D) been used but not paid.

Accepted Answer

An accrued expense account represents expenses that have been incurred or used or consumed but not yet paid for, hence option D is correct.

Question 10

Transactions are initially recorded in the:&#10;A) ledger.&#10;B) trial balance.&#10;C) journal.&#10;D) balance sheet.

Accepted Answer

Transactions are initially recorded in the journal. The journal is a chronological listing of transactions. The ledger is where entries from the journal are summarized and grouped by account. The trial balance is a list of all the accounts and their balances at a specific point in time. The balance sheet is a financial statement that shows a company's assets, liabilities, and equity at a specific point in time.

Question 11

The Accumulated Depreciation account is a(n):&#10;A) contra asset.&#10;B) liability.&#10;C) asset.&#10;D) operating expense.

Accepted Answer

The answer of The Accumulated Depreciation account is a(n):&#10;A) contra...

Deck 2: A Further Look at Financial Statements