Deck 4: Adjusting Entries and the Work Sheet

Question 1

Every Friday, Neil pays weekly wages of $15,000 to his workers for a five-day week which ends on that day. Assuming that the fiscal period ends on a Tuesday, the adjusting entry for accrual of wages recorded by Neil is:

A) debit to Wages Expense for $10,000, credit to Drawing for $10,000.
B) debit to Wages Expense for $6,000, credit to Wages Payable for $6,000.
C) debit to Drawing for $6,000, credit to Wages Payable for $6,000.
D) debit to Wages Payable for $15,000, credit to Wages Expense for $15,000.
E) debit to Accrued Wages for $5,000, credit to Wages Payable for $5,000.
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Answer 1

B

Question 2

The adjusting entry to record depreciation of equipment is

A) debit Accumulated Depreciation; credit Depreciation Expense.
B) debit Depreciation Expense; credit Accumulated Depreciation.
C) debit Equipment; credit Accumulated Depreciation.
D) debit Depreciation Expense; credit Depreciation Payable.
E) debit Accumulated Depreciation; credit Equipment.

Answer 2

B

Question 3

Which of the following refers to the cost of an asset minus its accumulated depreciation?

A) Opportunity value
B) Future value
C) Real-time value
D) Nominal value
E) Book value

Answer 3

E

Question 4

Foster Company bought equipment on January 3 of this year for $10,000. At the time of purchase, the equipment was estimated to have a useful life of nine years and a trade-in value of $1,000 at the end of nine years. Using the straight-line method, the amount of one year's depreciation is

A) $1,111.
B) $1,222.
C) $1,000.
D) $9,000.
E) $2,000.

Question 5

Accountants refer to the wages earned by employees but not paid to them at the end of an accounting period as:

A) accrued wages.
B) deposited wages.
C) carrying wages.
D) booked wages.
E) deductible wages.

Question 6

The Income Statement Debit column of the work sheet contains

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

Question 7

Which of the following terms refers to the cost of an equipment allocated as an expense over its estimated useful life?

A) Sunk cost
B) Depreciation
C) Adjustments
D) Book value
E) Mixed cost

Question 8

The balance in the Prepaid Insurance account before adjustment at the end of the year is $720, which represents twelve months' insurance purchased on December 1. The adjusting entry required for the month of December, on December 31, the end of the fiscal year, is

A) debit Insurance Expense, $60; credit Prepaid Insurance, $60.
B) debit Insurance Expense, $660; credit Prepaid Insurance, $660.
C) debit Prepaid Insurance, $60; credit Insurance Expense, $60.
D) debit Prepaid Insurance, $720; credit Insurance Expense, $720.
E) debit Insurance Expense, $60; credit Insurance Payable, $60.

Question 9

If the cost of a piece of equipment is $15,000 and accumulated depreciation amounts to $5,000, the book value of the equipment is:

A) $5,000.
B) $34,000.
C) $10,000.
D) $24,000.
E) $2,000.

Question 10

Which of the following accounts is not adjusted?

A) Accumulated Depreciation
B) Wages Payable
C) Depreciation Expense
D) Owner's Capital
E) Prepaid Insurance

Question 11

Which of the following entries contains both a balance sheet account and an income statement account?

A) An accumulated entry
B) A matching entry
C) An adjusting entry
D) A contra entry
E) A mixed entry

Question 12

The owner's Capital account is found on the

A) Trial Balance Credit column and Income Statement Debit column of a work sheet.
B) Trial Balance Credit column, Adjusted Trial Balance Credit column, and Balance Sheet Credit column of a work sheet.
C) Trial Balance Credit column, Adjustments Credit column, Adjusted Trial Balance Credit column, and Balance Sheet Credit column of a work sheet.
D) Trial Balance Debit column, Adjustments Debit column, Adjusted Trial Balance Credit column, and Income Statement Credit column of a work sheet.
E) Balance Sheet Debit column and nowhere else.

Question 13

The type of account and normal balance of Accumulated Depreciation are

A) contra asset, debit.
B) asset, credit.
C) asset, debit.
D) liability, credit.
E) contra asset, credit.

Question 14

Which of the following errors occur when an accountant does not record the entry to adjust accrued wages?

A) Understatement of Accounts payable in the balance sheet.
B) Overstatement of operating expense in the income statement.
C) Understatement of Wages Expense account in the income statement.
D) Overstatement of total liabilities in the balance sheet.
E) Understatement of total assets in the balance sheet.

Question 15

If the Income Statement Debit and Credit columns on a work sheet are not equal after adding the respective columns,

A) an error has been made.
B) the company generated a net income.
C) the company incurred a net loss.
D) the liabilities must exceed the assets.
E) the company either generated a net income or incurred a net loss.

Question 16

Accumulated Depreciation, Equipment, is shown as a(n)

A) expense on the income statement.
B) liability on the balance sheet.
C) deduction from net income on the statement of owner's equity.
D) contra account on the balance sheet.
E) addition to equipment on the balance sheet.

Question 17

The entry to record expired insurance is omitted. This error causes

A) assets to be overstated.
B) expenses to be overstated.
C) liabilities to be overstated.
D) liabilities to be understated.
E) an increase in liabilities on the balance sheet.

Question 18

The amount of net income will appear on the debit side of the Income Statement columns on a work sheet,

A) if total revenue exceeded total expenses for the period.
B) if withdrawals have been made during the period.
C) if total assets exceeded total liabilities for the period.
D) if total expenses exceeded total revenue for the period.
E) if net income exceeds the owner's withdrawals.

Question 19

In which columns of a work sheet would the adjusted balance of Accumulated Depreciation appear?

A) Adjusted Trial Balance Credit, Balance Sheet Debit
B) Adjusted Trial Balance Credit, Balance Sheet Credit
C) Adjusted Trial Balance Credit, Income Statement Credit
D) Adjusted Trial Balance Debit, Balance Sheet Debit
E) Trial Balance Debit, Adjusted Trial Balance Debit

Question 20

If total credits exceed total debits in the Balance Sheet columns of a work sheet,

A) a mistake has been made.
B) a net income has occurred.
C) assets exceed liabilities.
D) no conclusion can be drawn until the closing entries have been made.
E) a net loss has occurred.

Question 21

Assuming a normal balance, which of the following is correct concerning the balance sheet columns of the work sheet?

A) Liabilities are shown as debits.
B) The drawing account is shown as a debit.
C) Revenues are shown as credits.
D) Assets are shown as credits.

Question 22

Coffee Co. has a $3,600 balance in Prepaid Insurance that represents the premium paid in advance for a six-month liability insurance policy. Assuming that 4 months of premium is still remaining, the adjustment would be recorded in the work sheet as a:

A) credit to Insurance Expense, $2,400
B) debit to Insurance Expense, $2,400
C) credit to Prepaid Insurance, $1,200
D) debit to Prepaid Insurance, $1,200

Question 23

The $4,500 balance in Prepaid Insurance represents the premium paid in advance for a three-month liability insurance policy. Assuming that 2 months of premium has now expired, the adjustment would be recorded in the work sheet as a:

A) debit to Prepaid Insurance, $4,500
B) credit to Prepaid Insurance, $1,500
C) debit to Insurance Expense, $4,500
D) debit to Insurance Expense, $3,000

Question 24

Star Bright Tea Co. purchases equipment with a cost of $54,400 and a trade-in value of $4,000. Star Bright Tea Co. estimates that the equipment will have a useful life of 7 years. What is the amount of depreciation for one month assuming the straight-line method?

A) $600
B) $647.62
C) $7,200
D) $7,771.43

Question 25

If an accountant fails to make an adjusting entry at the end of a fiscal period to record expired insurance, the omission will cause

A) total assets to be understated.
B) total expenses to be understated.
C) total revenue to be understated.
D) liabilities to be overstated.
E) liabilities to be understated.

Question 26

If the amount of net income for the current period is less than the amount of the owner's withdrawals, there will be a(n)

A) decrease in the Cash account.
B) increase in the owner's Capital account.
C) decrease in the owner's Capital account.
D) increase in the Cash account.
E) increase in liabilities on the balance sheet.

Question 27

The Income Statement credit column of the work sheet would include which of the following account(s)?

A) assets, drawing, expenses
B) expenses
C) accumulated depreciation, liabilities, capital, revenue
D) revenue

Question 28

The adjusted trial balance debit column of the work sheet would include which of the following account(s)?

A) assets, liabilities, expenses
B) assets, drawing, expenses
C) assets, revenue, accumulated depreciation
D) accumulated depreciation, liabilities, capital

Question 29

Espanola Co. purchases equipment with a cost of $25,000 and a trade-in value of $4,000. Espanola Co. estimates that the equipment will have a useful life of 7 years. Assuming Espanola Co. has depreciated the equipment for a total of 4 years using the straight-line method, what is the book value of the equipment?

A) $12,000
B) $13,000
C) $8,000
D) None of the answers listed

Question 30

Jackson Co. purchases equipment with a cost of $26,000 and a trade-in value of $2,000. Jackson Co. estimates that the equipment will have a useful life of 5 years. Assuming Jackson Co. records depreciation for six months using the straight-line method, the adjustment would be recorded in the work sheet as a:

A) a debit to equipment and credit to depreciation expense, $2,400.
B) a debit to accumulated depreciation and a credit to equipment, $2,400.
C) a debit to depreciation expense and a credit to equipment, $2,400.
D) a debit to depreciation expense and a credit to accumulated depreciation, $2,400.

Question 31

Net income for Susan's Treasures is $25,000 for the current year. The owner withdrew $3,000 per month for personal living expenses. The owner's Capital account will show a net

A) decrease of $11,000.
B) increase of $61,000.
C) decrease of $36,000.
D) increase of $11,000.
E) increase of $36,000.

Question 32

Assuming a normal balance, which of the following is correct concerning the income statement columns of the work sheet?

A) Assets are shown as debits.
B) Liabilities are shown as debits.
C) The drawing account is shown as a credit.
D) Expenses are shown as debits.

Question 33

Assuming a normal balance, which of the following is correct concerning the balance sheet columns of the work sheet?

A) Assets are shown as debits.
B) Liabilities are shown as debits.
C) The drawing account is shown as a credit.
D) Revenues are shown as credits.

Question 34

Assuming a normal balance, which of the following is correct concerning the trial balance columns of the work sheet?

A) Assets are shown as credits.
B) Liabilities are shown as debits.
C) The drawing account is shown as a debit.
D) Expenses are shown as credits.

Question 35

Assume that Sophia Co. pays its employees $250 per day and that pay day falls on Friday. Sophia Co. employees work Monday through Friday. Assume the last day of the fiscal period falls on Wednesday, the adjustment for accrued wages would be recorded in the work sheet as a:

A) credit to wages payable, $1,250.
B) debit to wages expense, $1,250.
C) debit to wages expense, $750.
D) credit to cash, $750.

Question 36

Which of the following is correct concerning the work sheet?

A) Assets are shown as credits in the adjusted trial balance columns.
B) Capital is shown as a credit in the balance sheet columns.
C) Revenues are shown as credits in the balance sheet columns.
D) Liabilities are shown as credits in the income statement columns.

Question 37

Which of the following would be considered a fiscal year?

A) April 1, 20- to March 31, 20-
B) January 1, 20- to March 31, 20-
C) October 1, 20- to May 31, 20-
D) None of the answers listed

Question 38

The sequence of steps in the accounting process completed during the fiscal period is represented by:

A) the accounting cycle.
B) the adjustment period.
C) the worksheet cycle.
D) the accrual period.

Question 39

The Balance Sheet credit column of the work sheet would include which of the following account(s)?

A) assets, drawing
B) expenses
C) accumulated depreciation, liabilities, capital
D) revenue

Question 40

Which of the following refers to any period of time covering a complete accounting cycle?

A) A time cycle
B) A fiscal period
C) A journal period
D) A matching cycle

Question 41

Miller Co. has a net loss for the year, the net loss would be recorded

A) on the credit side of the balance sheet columns of the work sheet.
B) on the debit side of the balance sheet columns of the work sheet.
C) on the debit side of the income statement columns of the work sheet.
D) none of the answers listed.

Question 42

Squirrel Co. purchases equipment with a cost of $20,000 and a trade-in value of $2,000. Squirrel Co. estimates that the equipment will have a useful life of 5 years. Assuming Squirrel Co. records depreciation for the entire year, the adjusting entry would be recorded as

A)
$\begin{array} { l r } \text { Depreciation Expense } & \$ 3,600 \\\text { Equipment } & \$ 3,600\end{array}$
B)
$\begin{array} { l r } \text { Accumulated Depreciation } & \$ 3,600 \\\text { Depreciation Expense } & \$ 3,600\end{array}$
C)
$\begin{array} { l c } \text { Depreciation Expense } & \$ 3,600 \\\text { Cash } & \$ 3,600\end{array}$
D)
$\begin{array} { l r } \text { Depreciation Expense } & \$ 3,600 \\\text { Accumulated Depreciation } & \$ 3,600\end{array}$

Question 43

If a company has more than one revenue account, the company should

A) combine the revenue accounts on the Income Statement.
B) show each revenue account separately on the Income Statement.
C) prepare two separate Income Statements.
D) none of the answers listed

Question 44

The term, accrued wages, means that

A) expenses have not been incurred and not paid.
B) expenses have been incurred but not yet been recorded.
C) expenses have been incurred and paid.
D) none of the answers listed.

Question 45

Assuming a normal balance, which of the following is correct concerning the balance sheet columns of the work sheet?

A) Accumulated Depreciation is shown as a debit.
B) Accumulated Depreciation is shown as a credit.
C) Depreciation Expense is shown as a debit.
D) Depreciation Expense is shown as a credit.

Question 46

Assume that Gatesville Co. pays its employees $1,200 per day and that pay day falls on Friday. Gatesville Co. employees work Monday through Friday. Assume the last day of the fiscal period falls on Tuesday. Gatesville Co. would record an adjusting entry for the wages worked as follows:

A)
Wages Expense $\quad\$ 6,000$
Cash $\quad \$ 6,000$
B)
Wages Payable $\quad\$ 6,000$
Cash $\quad \$ 6,000$
C)
Wages Expense $\quad\$ 2,400$
Wages Payable $\quad \$ 2,400$
D)

Wages Expense $\quad\$ 2,400$
Cash $\quad\$ 2,400$

Question 47

Dowdy Co. has equipment with a cost of $30,000 and accumulated depreciation of $22,000. What is the book value of the equipment?

A) $8,000
B) $30,000
C) $52,000
D) $22,000

Question 48

Any additional investments by the owner should be shown as a(n)

A) subtraction on the Statement of Owner's Equity.
B) subtraction on the Income Statement.
C) addition on the Income Statement.
D) addition on the Statement of Owner's Equity.

Question 49

Which of the following principles ensures that the expenses for one time period are matched up with the related revenues for the same time period?

A) The depreciation principle
B) The matching principle
C) The contra principle
D) The mixed account principle

Question 50

A net loss should be shown as a(n)

A) addition on the Balance Sheet.
B) addition on the Income Statement.
C) subtraction on the Statement of Owner's Equity.
D) addition on the Statement of Owner's Equity.

Question 51

The adjusting entry to record the accrual of wages would involve a

A) debit to Wages Expense.
B) credit to Cash.
C) debit to Wages Payable.
D) none of the answers listed

Question 52

If revenues are larger than expenses, the resulting net income would be recorded

A) on the credit side of the income statement columns of the work sheet.
B) on the debit side of the balance sheet columns of the work sheet.
C) on the debit side of the income statement columns of the work sheet.
D) none of the answers listed.

Question 53

The adjusting entry to record depreciation would involve a

A) debit to Depreciation Expense.
B) credit to Equipment.
C) credit to Cash.
D) debit to Accumulated Depreciation.

Question 54

The adjusting entry to record the amount of prepaid insurance used or expired would involve a

A) debit to Prepaid Insurance.
B) credit to Cash.
C) credit to Insurance Payable.
D) debit to Insurance Expense.

Question 55

Which of the following accounts is credited for a direct deduction from Equipment in the asset section of a balance sheet?

A) Sunk Depreciation, Equipment
B) Opportunity Cost, Equipment
C) Accrued Cost, Equipment
D) Accumulated Depreciation, Equipment

Question 56

Sweet Stuff Co. purchases equipment with a cost of $36,400 and a trade-in value of $4,000. Sweet Stuff Co. estimates that the equipment will have a useful life of 9 years. Assuming Sweet Stuff Co. records depreciation for one month using the straight-line method, the adjustment would be recorded in the work sheet as a:

A) credit to depreciation expense, $3,600.
B) debit to depreciation expense, $300.
C) credit to equipment, $300.
D) credit to accumulated depreciation, $3,600.

Question 57

Burnet Co. has a $4,050 balance in Prepaid Insurance that represents the premium paid in advance for a nine-month liability insurance policy. Assuming that 5 months of premium is still remaining, the adjusting entry would be recorded as:

A)
Insurance Expense $\quad \$ 1,800$
Prepaid Insurance $\quad \$ 1,800$
B)
Insurance Expense $\quad \$ 2,250$
Prepaid Insurance $\quad \$ 2,250$
C)
Insurance Expense $\quad \$ 1,800$
Cash $\quad\$ 1,800$
D)
$\begin{array} { l r } \text { Insurance Expense } & \$ 2,250 \\\text { Cash } & \$ 2,250\end{array}$

Question 58

San Antonio Company's accountant just completed the work sheet; however, the Balance Sheet columns are not equal. What step(s) should the accountant perform?

A) Check to see if the amount of net income or loss is recorded in the correct column.
B) Verify the addition of all columns.
C) Look to see if the appropriate amounts have been recorded in the columns.
D) Verify that the amounts have been correctly carried over from the Trial Balance columns.
E) All of the answers listed are correct.

Question 59

Which of the following statements is true?

A) Adjusting entries contain only balance sheet accounts.
B) Adjusting entries contains only income statement accounts.
C) Adjusting entries contains an income statement account and a balance sheet account.
D) none of the answers listed.

Question 60

After preparing the work sheet, adjusting entries must be recorded in the __________ and then posted to the ______________.

A) general journal; general ledger
B) trial balance; financial statements
C) general journal; financial statements
D) none of the answers listed

Question 61

Drawing is recorded in the Balance Sheet Debit column of a work sheet.

Question 62

The owner's Drawing account will not appear on an adjusted trial balance on the work sheet.

Question 63

Accumulated depreciation appears on the income statement.

Question 64

An asset's book value represents the true market value of the asset.

Question 65

If the adjustment for accrued wages is omitted, liabilities and expenses will be overstated.

Question 66

Failure to record the adjusting entry for accrued wages results in the current year's net income being overstated.

Question 67

The maximum period covered by a work sheet is six months.

Question 68

Accounts that are partly income statement amounts and partly balance sheet amounts are called mixed accounts.

Question 69

The expiration of usefulness of equipment during an accounting period is called depreciation.

Question 70

Sunny Day Company has $740 of supplies reported on its unadjusted trial balance as of July 31. During the month of July Sunny Day Company used $325 worth of supplies. What is the entry to adjust supplies?

A)
$\begin{array} { l r } \text { Supplies Expense } & \$ 325 \\\text { Cash } & \$ 325\end{array}$
B)
$\begin{array} { l } \text { Supplies }&\$ 415 \\\text { Supplies Expense }&\$ 415\end{array}$
C)
Supplies Expense $\quad\$ 415$
Supplies $\quad \$ 415$
D)
Supplies Expense $\quad\$ 325$
Supplies $\quad\$ 325$

Question 71

A fiscal period must begin on January 1.

Question 72

The owner's Capital account is shown in the Income Statement Credit column on a work sheet.

Question 73

Financial statements are prepared by taking the figures directly from the work sheet.

Question 74

In recording the adjusting entries for depreciation, both accounts involved are increased.

Question 75

As equipment is depreciated, its book value increases and its accumulated depreciation increases.

Question 76

The work sheet is used to pull together up-to-date account balances needed to prepare the financial statements.

Question 77

Because adjusting entries are recorded on a work sheet, they do not need to be journalized or posted.

Question 78

Failure to record the adjusting entry for depreciation results in assets and owner's equity being overstated on the balance sheet.

Question 79

Failure to record the adjusting entry for depreciation will overstate assets on the balance sheet.

Question 80

In recording the adjusting entry for accrued wages, all the accounts involved are decreased.