Deck 4: Adjusting Entries and the Work Sheet

Question 1

A business pays weekly wages of $20,000 on Friday for a five-day week ending on that day. If the fiscal period ends on Wednesday, the adjusting entry is

A)debit Wages Expense, $12,000; credit Drawing, $12,000.
B)debit Wages Expense, $12,000; credit Wages Payable, $12,000.
C)debit Drawing, $12,000; credit Wages Payable, $12,000.
D)debit Wages Payable, $12,000; credit Wages Expense, $12,000.
E)none of these.

Answer 1

B

Question 2

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.

Answer 2

A

Question 3

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.

Answer 3

A

Question 4

Failure to record the entry for accrued wages results in

A)wages payable being overstated.
B)net income being understated.
C)wages expense being understated.
D)total assets being understated.
E)total assets being overstated.

Question 5

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 6

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 7

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 8

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 9

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 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

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 12

Depreciation is

A)a decrease in the fair market value of an asset.
B)an expense that is incurred during an accounting period.
C)a method of saving cash to replace plant assets.
D)added to the cost of equipment on the balance sheet.
E)shown on the balance sheet as a liability.

Question 13

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 14

If equipment cost $20,000 and accumulated depreciation amounts to $6,000, the book value of the equipment is

A)$26,000.
B)$6,000.
C)$14,000.
D)$20,000.
E)none of these.

Question 15

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 16

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 17

An adjusting entry must contain

A)two balance sheet accounts.
B)two income statement accounts.
C)a balance sheet account and an income statement account.
D)an asset account and a liability account.
E)an asset account and an expense account.

Question 18

The difference between the balance of the Equipment account and its related Accumulated Depreciation account is called

A)trade-in value.
B)a contra asset.
C)an accrued liability.
D)an accrued asset.
E)book value.

Question 19

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.

Question 20

Accrued wages are wages that

A)have been earned by employees but not paid.
B)have been paid.
C)have been neither earned by employees nor paid.
D)were earned by employees and have been paid.
E)have been paid but not earned by employees.

Question 21

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 22

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 23

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 24

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 25

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 26

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 27

A(n) ____________ is a fiscal period consisting of twelve consecutive months.

A)fiscal year
B)fiscal time
C)accounting cycle
D)accrual period

Question 28

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 29

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 30

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 31

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 32

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 33

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 34

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 35

A _________ is any period of time covering a complete accounting cycle.

A)fiscal time
B)fiscal period
C)tax year
D)accounting period

Question 36

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 37

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 38

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 39

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 40

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 41

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 42

Which of the following statements is true?

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

Question 43

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 44

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 45

When preparing the financial statements, Accumulated Depreciation is recorded

A)as an addition in the asset section of the balance sheet.
B)as a subtraction from revenues on the income statement.
C)as an addition in the liabilities section of the balance sheet.
D)as a subtraction in the asset section of the balance sheet.

Question 46

A fiscal period must begin on January 1.

Question 47

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 48

The ____________ requires expenses to be recorded in the same time period as revenue.

A)revenue recognition principle
B)matching principle
C)accrual principle
D)none of the answers listed

Question 49

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 50

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

Question 51

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 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

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 54

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 55

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 56

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 57

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

Question 58

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 59

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 60

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 61

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

Question 62

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

Question 63

A net loss occurs when there are more expenses than revenue.

Question 64

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

Question 65

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

Question 66

Accumulated depreciation appears on the income statement.

Question 67

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

Question 68

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

Question 69

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

Question 70

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

Question 71

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

Question 72

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

Question 73

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

Question 74

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

Question 75

The owner's personal withdrawals for the year cause a decrease in net income.

Question 76

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

Question 77

If revenue and expenses were equal for an accounting period, the result would be neither a profit nor a loss.

Question 78

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

Question 79

The ending balance in the supplies asset accounts is the amount the company has used during the reporting period.

Question 80

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