Deck 3: Adjusting and Closing Entries

Question 1

Accounting for revenue on an accrual basis means that no entry of revenue is made until the cash is actually received.

Answer 1

False

Question 2

When cash is paid prior to incurring an expense, it is a deferral.

Answer 2

True

Question 3

Accounts Receivable and Accounts Payable are examples of accruals.

Answer 3

True

Question 4

The matching principle in accounting requires the matching of:

A)revenue earned with the assets used to produce the revenue.
B)revenue earned with the assets used less the liabilities incurred.
C)revenue earned with the liabilities used to produce the revenue.
D)revenue earned with the expenses incurred to produce the revenue.

Question 5

Because inventories are high, Target should end its fiscal year in either November or December.

Question 6

A period of time, such as a month or quarter, could be considered a(n):

A)fiscal year.
B)accounting period.
C)revenue period.
D)income period.

Question 7

It does not matter when a fiscal year starts as long as it is twelve consecutive months long.

Question 8

If a business records expenses when paid, the company is using the:

A)cash basis of accounting.
B)accrual basis of accounting.
C)adjustment basis of accounting.
D)the expense basis of accounting.

Question 9

Items for which we have received payment, but have not yet delivered the service, are called:

A)referrals.
B)deferrals.
C)accruals.
D)non-cash items.

Question 10

If Crane company records revenue when cash is received, they are using the:

A)cash basis of accounting.
B)accrual basis of accounting.
C)adjustment basis of accounting.
D)expense basis of accounting.

Question 11

Holly's Holiday Shoppe would most likely end their fiscal year in which month?

A)June
B)November
C)December
D)Any of the above.

Question 12

The revenue recognition principle states that revenues should be recognized

A)when cash is received.
B)when they are earned, if cash will be received within the year.
C)when they are earned.
D)within six months of receiving cash.

Question 13

The majority of businesses normally end their fiscal year on:

A)June 30.
B)September 30.
C)December 31.
D)some other date.

Question 14

If revenues are recognized and recorded when earned, the company is using the:

A)cash basis of accounting.
B)accrual basis of accounting.
C)adjustment basis of accounting.
D)the expense basis of accounting.

Question 15

GAAP requires the use of accrual accounting.

Question 16

Under accrual accounting, the most important GAAP concepts to remember are the recognition principle for expenses and the matching principle for revenues.

Question 17

Part of accrual accounting depends upon recording ________ entries at the end of the accounting period.

A)expense
B)revenue
C)adjusting
D)debit

Question 18

If C&S, Inc. records expenses in the time period when incurred, they are using the:

A)cash basis of accounting.
B)accrual basis of accounting.
C)adjustment basis of accounting.
D)expense basis of accounting.

Question 19

Item costs that have been incurred, but not yet paid, are called:

A)referrals.
B)deferrals.
C)accruals.
D)non-cash items.

Question 20

The type of accounting required by GAAP is:

A)modified cash.
B)hybrid cash.
C)cash.
D)accrual.

Question 21

Recording Social Security Taxes Payable would be an example of a(n):

A)deferred expense.
B)deferred revenue.
C)accrued expense.
D)accrued revenue.

Question 22

Adjusting entries are made only for accrued revenues and accrued expenses.

Question 23

Land must be adjusted for depreciation at the end of the period.

Question 24

The Supplies account must be adjusted to reflect the supplies that were used during the period.

Question 25

Recording Interest Receivable would be an example of a(n):

A)deferred expense.
B)deferred revenue.
C)accrued expense.
D)accrued revenue.

Question 26

An example of a contra-account would be Accumulated Depreciation.

Question 27

Adjusting entries are used to update accounts at the end of an accounting period.

Question 28

Recording Unearned Subscriptions Revenue would be an example of a(n):

A)deferred expense.
B)deferred revenue.
C)accrued expense.
D)accrued revenue.

Question 29

Recording Income Taxes Payable would be an example of a(n):

A)deferred expense.
B)deferred revenue.
C)accrued expense.
D)accrued revenue.

Question 30

All fixed assets are subject to depreciation.

Question 31

Wages that have been accrued need to be recorded so that the matching principle is reflected in Wages Expense.

Question 32

Adjusting entries always include a debit or credit to Cash.

Question 33

Recording the collection of three months of advance rent from a client in an unearned account would be an example of a(n):

A)deferred expense.
B)deferred revenue.
C)accrued expense.
D)accrued revenue.

Question 34

The asset cost less accumulated depreciation equals salvage value.

Question 35

Unearned Ticket Revenue must be adjusted to show how much of the deferred revenue has been earned during the period.

Question 36

Recording Accounts Receivable would be an example of a(n):

A)deferred expense.
B)deferred revenue.
C)accrued expense.
D)accrued revenue.

Question 37

Recording Wages Payable would be an example of a(n):

A)deferred expense.
B)deferred revenue.
C)accrued expense.
D)accrued revenue.

Question 38

Recording the purchase of supplies in a prepaid account would be an example of a(n):

A)deferred expense.
B)deferred revenue.
C)accrued expense.
D)accrued revenue.

Question 39

Recording Prepaid Rent would be an example of a(n):

A)deferred expense.
B)deferred revenue.
C)accrued expense.
D)accrued revenue.

Question 40

Accumulated Depreciation is recorded in the Liabilities section of the Balance Sheet.

Question 41

Allied, Inc. bought a 3-year insurance policy on August 1 for $3,900. Assume no other adjusting entries have been done this fiscal year. The adjusting entry on December 31 would be:

A)debit Insurance Expense, $108; credit Prepaid Insurance, $108.
B)debit Prepaid Insurance, $108; credit Insurance Expense, $108.
C)debit Insurance Expense, $542; credit Prepaid Insurance, $542.
D)debit Prepaid Insurance, $542; credit Insurance Expense, $542.

Question 42

Which of the following accounts is NOT affected by an accrued revenue?

A)Accounts Receivable
B)Rent Revenue
C)Unearned Rent Revenue
D)Interest Receivable

Question 43

Fixed assets that are depreciated are sometimes called:

A)Accounts Payable.
B)current assets.
C)long-term assets.
D)long-term liabilities.

Question 44

A machine with a cost of $20,000, a salvage value of $8,000 and expected life of 15 years was purchased on September 1. For a calendar year company, the journal entry to record depreciation expense for the first year would be to:

A)debit Depreciation Expense, $67; credit Accumulated Depreciation, $67.
B)debit Depreciation Expense, $333; credit Accumulated Depreciation, $333.
C)debit Depreciation Expense, $267; credit Accumulated Depreciation, $267.
D)debit Depreciation Expense, $200; credit Accumulated Depreciation, $200.

Question 45

At the beginning of the period, the Supplies account has a balance of $700. At the end of the period, the balance in the account was $475. The adjusting entry would be:

A)debit Supplies Expense, $475; credit Supplies, $475.
B)debit Supplies, $475; credit Supplies Expense, $475.
C)debit Supplies Expense, $225; credit Supplies, $225.
D)debit Supplies, $225; credit Supplies Expense, $225.

Question 46

If a piece of equipment was purchased on September 1, it would have ________ months depreciation included in the adjusting entry for the calendar year.

A)12
B) 8
C) 4
D) 6

Question 47

Which of the following accounts is NOT affected by an accrued expense?

A)Sales Tax Payable
B)Supplies
C)Interest Expense
D)Wages Payable

Question 48

The recording of depreciation is related to a(n):

A)deferred expense.
B)deferred revenue.
C)accrued expense.
D)accrued revenue.

Question 49

A machine with a salvage value of $2,000 and a cost of $40,000 was purchased on January 1, 2012. What is the depreciation expense for 2012 if the company uses straight-line depreciation for 10 years?

A)$40,000
B)$38,000
C)$4,000
D)$3,800

Question 50

Which of the following accounts would NOT be debited or credited in an adjusting entry?

A)Supplies Expense
B)Office Equipment
C)Wages Expense
D)Wages Payable

Question 51

The total dollars in an Accumulated Depreciation account are:

A)added to the corresponding asset account.
B)divided into the corresponding asset account.
C)subtracted from the corresponding asset account.
D)subtracted from the corresponding liability account.

Question 52

During a recent week, incurred wages were $800. However, $480 of the wages had not been paid. Assume no other adjusting entries have been done this fiscal year. The adjusting entry for wages would be:

A)debit Wages Payable, $480; credit Wages Expense, $480.
B)debit Wages Expense, $480; credit Wages Payable, $480.
C)debit Wages Payable, $320; credit Wages Expense, $320.
D)debit Wages Expense, $320; credit Wages Payable, $320.

Question 53

The value of an asset after all allowable depreciation has been taken is called:

A)depreciable value.
B)market value.
C)salvage value.
D)trade-in value.

Question 54

Recording season ticket monies received in advance as unearned revenue would be an example of a(n):

A)deferred expense.
B)deferred revenue.
C)accrued expense.
D)accrued revenue.

Question 55

Supplies on hand were $800 at the start of the year. At the end of the year, it was determined that $450 of supplies had been used. What is the adjusting entry for supplies?

A)debit Supplies, $450; credit Supplies Expense, $450
B)debit Supplies, $350; credit Supplies Expense, $350
C)debit Supplies Expense, $450; credit Supplies, $450
D)debit Supplies Expense, $350; credit Supplies, $350

Question 56

Adjusting entries for Supplies and Prepaid Rent would be adjustments for:

A)deferred expense.
B)deferred revenue.
C)accrued expense.
D)accrued revenue.

Question 57

A 40-month insurance policy was purchased for $2,100 on May 1. How much insurance will be expensed on December 31?

A)$2,100
B)$53
C)$210
D)$420

Question 58

A piece of equipment cost $700 and has a salvage value of $500. If it has an 5-year life, the annual depreciation expense under straight-line depreciation would be:

A)$140.
B)$40.
C)$500.
D)$200.

Question 59

The difference between the cost of office equipment and accumulated depreciation-office equipment is called:

A)market value.
B)salvage value.
C)book value.
D)original value.

Question 60

Which of the following accounts would NOT be adjusted?

A)Accumulated Depreciation
B)Cash
C)Depreciation Expense
D)Wages

Question 61

On January 1, Daisy Company paid $6,400 for six months rent. Assume no other adjusting entries have been done this fiscal year. What would the adjusting entry be on March 31?

A)Debit Rent Expense $1,067, credit Prepaid Rent $1,067
B)Debit Rent Expense $1,067, credit Cash $1,067
C)Debit Rent Expense $3,200, credit Prepaid Rent $3,200
D)Debit Rent Expense $3,200, credit Cash $3,200

Question 62

On January 1 Corporate Condos, Inc received $89,000 for one year's rent for building A. What would the adjusting entry be on March 31?

A)Debit Rent Expense $7,417, credit Prepaid Rent $7,417
B)Debit Unearned Rent Revenue $7,417, credit Rent Revenue $7,417
C)Debit Rent Expense $22,250, credit Prepaid Rent $22,250
D)Debit Unearned Rent Revenue $22,250, credit Rent Revenue $22,250

Question 63

After preparing the adjusted trial balance, those figures are used to complete the Balance Sheet only.

Question 64

Salary expense is $2,600 per day, Monday through Friday, and the business pays employees each Friday. If December 31 falls on a Tuesday, the adjusting entry to record accrued salaries would be to:

A)debit Salaries Payable, $2,600; credit Salaries Expense, $2,600.
B)debit Salaries Expense, $5,200; credit Salaries Payable, $5,200.
C)debit Salaries Expense, $2,600; credit Salaries Payable, $2,600.
D)debit Salaries Payable, $5,200; credit Salaries Expense, $5,200.

Question 65

Salary expense is $1,175 per day, Monday through Friday, and the business pays employees each Friday. If December 31 falls on a Wednesday, the amount of the adjusting entry to record accrued salaries would be:

A)$3,525.
B)$1,175.
C)$2,350.
D)$5,875.

Question 66

Another name for "book value" is:

A)Accumulated Depreciation.
B)carrying value.
C)market value.
D)Depreciation Expense.

Question 67

A company started the year with no supplies. During this year they bought $230 worth of supplies on account and later paid $150 of this debt. If there were $20 supplies left at the end of this year, what was the supply expense for the period?

A)$210
B)$80
C)$20
D)$60

Question 68

Safety First Supply Company purchased a 5-year insurance policy for $2,900. What would the adjusting entry be at the end of the first year?

A)Debit Insurance Expense $2,900, credit Prepaid Insurance $2,900
B)Debit Insurance Expense $2,900, credit Cash $2,900
C)Debit Insurance Expense $580, credit Prepaid Insurance $580
D)Debit Insurance Expense $580, credit Cash $580

Question 69

If a company forgets to make an adjusting entry relating to a deferred revenue, which of the following would NOT be true?

A)Liabilities would be overstated
B)Revenues would be understated
C)Retained earnings would be overstated
D)Stockholders' Equity would be understated

Question 70

The balance of Retained Earnings on the adjusted trial balance does not represent the final Retained Earnings balance on the Balance Sheet.

Question 71

Net income or net loss can be determined by the adjusted trial balance figures.

Question 72

Annual depreciation on equipment at Charmed, Inc.is $1,800. The adjusting entry to record one month's worth of depreciation would be:

A)Debit Depreciation Expense $150, credit Cash $150
B)Debit Depreciation Expense $150, credit Accumulated Depreciation $150
C)Debit Depreciation Expense $1,800 credit Cash $1,800
D)Debit Depreciation Expense $1,800, credit Accumulated Depreciation $1,800

Question 73

A machine costing $49,000 has a life of 10 years. The salvage value is $10,000. It was purchased on February 1. The depreciation expense for the calendar year is: (Do not round any intermediary calculations. Round your final answer to the nearest dollar.)

A)$408.
B)$4,492.
C)$325.
D)$3,575.

Question 74

Supplies on hand were $434 of the original $1,134. The adjusting amount for supplies for the year would be:

A)$1,134.
B)$434.
C)$700.
D)some other number.

Question 75

If a company forgets to make an adjusting entry relating to a deferred expense, which of the following would NOT be true?

A)Assets would be overstated
B)Expenses would be understated
C)Retained earnings would be overstated
D)Stockholders' Equity would be understated

Question 76

Which of the following is a TRUE statement regarding the Unearned Revenue account?

A)Unearned Revenue is accrued as the business provides goods or services.
B)Unearned Revenue is expensed as the business provides goods or services.
C)Unearned Revenue decreases as the business provides goods or services.
D)Unearned Revenue increases as the business provides goods or services.

Question 77

Prepaid expenses are also called:

A)accrued expenses.
B)deferred expenses.
C)both A and B.
D)neither A or B.

Question 78

The journal entry to record $2,750 of depreciation expense for the year would be to:

A)debit Depreciation Expense, $2,750; credit Equipment, $2,750.
B)debit Accumulated Depreciation, $2,750; credit Depreciation Expense, $2,750.
C)debit Accumulated Depreciation, $2,750; credit Equipment, $2,750.
D)debit Depreciation Expense, $2,750; credit Accumulated Depreciation, $2,750.

Question 79

The balance in Unearned Revenues prior to adjustment was $3,150. If the amount still unearned as of the end of the period is $1,700, the adjusting entry needed would be to:

A)debit Cash, $3,150; credit Unearned Service Revenue, $3,150.
B)debit Unearned Service Revenue, $1,700; credit Service Revenue, $1,700.
C)debit Unearned Service Revenue, $1,450; credit Service Revenue, $1,450.
D)debit Service Revenue, $1,450; credit Unearned Service Revenue, $1,450.

Question 80

The adjusted trial balance is prepared before the adjusting entries are completed and posted.