Question 1

The ending balances in the ledger after posting the adjusting entries, will be the same amounts that are found on the worksheet in the adjusted trial balance column.

Accepted Answer

This is true because the purpose of adjusting entries is to show the correct ending balances in the accounts after taking into consideration any previously unrecorded transactions or expenses. The adjusted trial balance column on the worksheet reflects these corrected balances, and they should match the ending balances in the ledger accounts after the adjusting entries have been posted.

Question 2

Adjusting entries are necessary to update the Chart of Accounts before preparing Financial Statements.

Accepted Answer

Adjusting entries are necessary to ensure that the revenue recognition and matching principles are followed, not specifically to update the Chart of Accounts. They are made in the general ledger accounts to record revenues and expenses in the period they occur, not to update the chart itself.

Question 3

Linda's Flowers purchased a two-year insurance policy for $2,400. The adjusting journal entry for one month is

Accepted Answer

The total cost of the insurance policy is $2,400 for two years, which equals 24 months. Dividing $2,400 by 24 months gives $100 per month. The adjusting entry to record one month of insurance expense involves debiting Insurance Expense and crediting Prepaid Insurance for $100.

Question 4

Marty's Bakery has a daily payroll of $400, and all employees are paid on Thursday afternoons. Assume that the last day of the month falls on Wednesday. Which of the following adjusting journal entries is needed on that date?

Accepted Answer

Since the payroll is $400 daily and employees are paid on Thursdays, by the end of Wednesday (the last day of the month), three days of salaries (Monday, Tuesday, and Wednesday) would not have been paid yet. Therefore, the company needs to recognize an expense for these three days, totaling $1,200 ($400 x 3 days), as an accrued liability.

Question 5

Sophie's Bridal Shop bought a computer worth $2,150 with an expected life of 3 years and a residual value of $500. What is the adjusting journal entry after the first year?

Accepted Answer

The adjusting entry after the first year should be a depreciation expense of ($2,150-$500)/3 = $550 and the corresponding increase in accumulated depreciation. Therefore, the correct choice is C, where depreciation expense is debited and accumulated depreciation is credited.

Question 6

Ruel Records' weekly payroll of $500 is paid on Fridays. Assume that the last day of the month falls on Tuesday. Which of the following adjusting journal entries is needed on that date?

Accepted Answer

Since the last day of the month falls on a Tuesday and the weekly payroll is paid on Fridays, there are two days of payroll (Wednesday and Thursday) that have not been paid yet. Therefore, an adjusting entry is needed to recognize the expense for those two days that have been earned but not yet paid. Choice C recognizes the salaries expense for those two days (2/5 * $500 = $200) while also accruing the liability for the unpaid portion.

Question 7

After formal financial reports have been prepared, journal entries and posting must be completed before the ledger is updated.

Accepted Answer

This statement is true. Journal entries must be made based on the financial reports and posted to the appropriate accounts in the ledger before the ledger is considered up-to-date.

Question 8

Crystal's Hair Studio showed office supplies available of $1,400. A count of the supplies left on hand as of June 30 was $1,100. The adjusting journal entry is

Accepted Answer

The adjusting entry should decrease the Office Supplies asset account to reflect the supplies that have been used up or depleted, and increase the Office Supplies Expense account to record the expense of using those supplies. Since the supplies used up were $300 ($1,400 - $1,100), the entry should be Office Supplies Expense $300 and Office Supplies $300. Therefore, the correct choice is D.

Question 9

Adjusting entries are made after the Financial Statements are completed.

Accepted Answer

The answer of Adjusting entries are made after the Financial...

Question 10

Adjusting journal entries are

Accepted Answer

Adjusting journal entries are prepared from the information on the worksheet, entered in the general journal, and then posted. They are necessary to bring accounts up to date and to ensure that financial statements reflect the correct amounts.

Question 11

BC Tea Company depreciation for the month is $150. The adjusting journal entry is

Accepted Answer

The adjusting entry for depreciation involves debiting Depreciation Expense and crediting Accumulated Depreciation. Option A correctly reflects this entry. Option B is incorrect because Depreciation Payable is not a valid account for recording depreciation. Option C is incorrect because Equipment is not the account that needs to be adjusted for depreciation. Option D reverses the debit and credit sides of the entry, which is incorrect.

Question 12

The balance in the Accumulated Depreciation account remains about the same each period, while Depreciation Expense increases annually.

Accepted Answer

The balance in the Accumulated Depreciation account increases each period as Depreciation Expense is added to it. As a result, the balance in the Accumulated Depreciation account will typically be larger in later periods compared to earlier periods. Meanwhile, Depreciation Expense is typically constant each period, unless there is a change in the asset's estimated useful life or salvage value.

Question 13

Prepaid Advertising appeared as $2,400 on the trial balance and as $2,200 on the adjusted trial balance. The proper adjusting journal entry to reflect the change must have been

Accepted Answer

The prepaid advertising account decreased by $200 ($2,400 - $2,200 = $200), which means that it was used up during the accounting period and should therefore be expensed. The proper adjusting journal entry would be to debit advertising expense (to increase the expense) and credit prepaid advertising (to decrease the asset). The correct entry is therefore Advertising Expense $200 and Prepaid Advertising $200. Choice D is the only option that reflects this entry.

Question 14

These entries are prepared and posted to the ledger in order to update the ledger accounts before the next accounting period

Accepted Answer

Adjusting entries are prepared at the end of an accounting period to update accounts before the financial statements are prepared. They are made to ensure that revenue and expenses are recognized in the correct period and that the balance sheet reflects the true financial position of the business. These adjusting entries may include the recognition of prepaid expenses or unearned revenue, as well as adjusting for accrued expenses or revenue. The trial balance is a list of all accounts and balances at a point in time and does not necessarily reflect any necessary adjustments. Journalizing and the general journal are steps in the accounting process but not specifically related to adjusting entries.

Question 15

Morgan's Consulting bought a scanner worth $5,000 with an expected life of 7 years and a residual value of $1,500. What is the adjusting journal entry for the first year?

Accepted Answer

D is the correct choice as it reflects the adjusting entry required for the first year of straight-line depreciation using the formula (Cost - Residual Value) / Useful Life. This formula gives us a depreciation expense of $643 per year for Morgan's Consulting. Therefore, the adjusting entry for the first year should be to debit Depreciation Expense for $500 and credit Accumulated Depreciation, Scanner for $500.

Question 16

Adjusting journal entries are prepared from

Accepted Answer

Adjusting journal entries are prepared based on the adjustments column of the worksheet to ensure that all revenues and expenses are recognized in the correct accounting period and that the balances of the balance sheet accounts are accurate. Source documents, the balance sheet, and the income statement may be used as references for making these adjustments, but they are not the primary source for creating adjusting journal entries.

Question 17

After posting adjusting entries, the temporary accounts will be set back to zero.

Accepted Answer

Adjusting entries are made to update the accounts and bring them to their correct balances; they do not set temporary accounts back to zero. Closing entries are the ones that reset temporary accounts (revenues, expenses, dividends) to zero.

Question 18

Adjusting entries bring the ledger accounts up to date.

Accepted Answer

Adjusting entries are made at the end of an accounting period to update the ledger accounts based on accrual accounting principles and bring them up to date before preparing financial statements.

Question 19

Adjusting journal entries

Accepted Answer

Adjusting journal entries are made to bring accounts up to date before preparing financial statements at the end of an accounting period. They are not recorded in the ledger until after they have been posted from the worksheet. Therefore, the best choice is B.

Question 20

It is not necessary to ensure that each adjusting entry balances.

Accepted Answer

Adjusting entries must ensure that the accounts are accurate and up-to-date, which includes balancing the accounts affected by the entry. Inaccurate or unbalanced adjusting entries can lead to errors in financial statements or misrepresentations of the company's financial position.

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