Question 1

On August 1, 2016, Brian Quinn received $9600 for legal services to be performed evenly throughout the next twelve months, beginning August 1, 2016. An adjusted trial balance prepared on December 31, 2016 will show a credit balance in Unearned Revenue in the amount of:

Accepted Answer

By December 31, 2016, five months of services have been performed, so $4000 ($9600/12 months * 5 months) is earned, leaving $5600 unearned.

Question 2

The Trial Balance Worksheet does NOT have columns for:

Accepted Answer

The Trial Balance Worksheet typically has columns for the unadjusted trial balance and the adjusted trial balance, but does not have separate columns for adjusting or closing journal entries. These entries would be made separately and then reflected in the adjusted trial balance column.

Question 3

On December 1, 2015, Carrie's Day Care receives $1500 in advance for an agreement to care for Susan's children for the months of December, January, and February. Carrie's Day Care will make an adjusting entry on December 31, 2015 to:

Accepted Answer

The adjusting entry on December 31, 2015, should recognize the revenue earned for December. Since the service is provided over three months, $500 is earned in December. Therefore, Unearned Revenue is debited by $500 to recognize this portion as earned revenue.

Question 4

If adjusting entries are not prepared, which financial statements are misstated?

Accepted Answer

Adjusting entries ensure that all revenues and expenses are recorded in the correct accounting period, affecting the income statement. They also adjust asset and liability accounts, impacting the balance sheet. Consequently, the statement of retained earnings is affected as it relies on accurate net income and dividends.

Question 5

A company purchased medical equipment for $190,000 on January 1, 2016. The company determined that the yearly depreciation expense is $19,000. What will be the ending balance in the Accumulated Depreciation-Medical Equipment at December 31, 2018?

Accepted Answer

The equipment depreciates by $19,000 per year. From January 1, 2016, to December 31, 2018, is 3 years. So, 3 years x $19,000/year = $57,000 accumulated depreciation.

Question 6

A company has $300 in Prepaid Advertising before any adjustments. At the end of the year, an adjusting entry is made to debit Advertising Expense for $110. The ending balance in the Prepaid Advertising account will be:

Accepted Answer

The adjusting entry debits Advertising Expense for $110, which means $110 of the prepaid amount has been used. Therefore, the ending balance in Prepaid Advertising is $300 - $110 = $190.

Question 7

If a Trial Balance Worksheet is prepared, which columns are used to prepare the financial statements?

Accepted Answer

The adjusted trial balance columns are used to prepare the financial statements because they reflect any necessary adjustments made after the unadjusted trial balance columns were prepared. This ensures that the financial statements are accurate and reflect the true financial position of the company. The adjustments columns are used to record any adjustments made, but they are not the final columns used to prepare the financial statements.

Question 8

A company purchased supplies during the year totaling $22,000. At the end of the year, they made an adjusting entry to record $16,000 of supplies that had been used during the year. The ending balance in the Supplies account after the adjustment was $10,000. The beginning balance in the Supplies account was:

Accepted Answer

The answer of A company purchased supplies during the year...

Question 9

In lieu of using the Trial Balance Worksheet to prepare the financial statements, an accountant can use the:

Accepted Answer

The accountant can use the ledger to prepare the financial statements by simply transferring the ending balances of each account into the financial statement format. This method is known as the "ledger approach" and can be more efficient than using a trial balance worksheet.

Question 10

Why are adjusting entries prepared?

Accepted Answer

Adjusting entries are prepared to update accounts that are not up to date and to ensure that the unadjusted trial balance is ready for preparing the financial statements. Day to day transactions are recorded through regular journal entries and do not require adjusting entries.

Question 11

The adjustments columns of the Trial Balance Worksheet summarize the:

Accepted Answer

The adjustments columns of the Trial Balance Worksheet summarize the adjusting journal entries made at the end of the accounting period to ensure that the financial statements reflect accurate and up-to-date information. Therefore, choice C - adjusting journal entries - is the correct option. Choices A, B, and D are incorrect as they do not relate to the adjustments columns of the Trial Balance Worksheet.

Question 12

A Trial Balance Worksheet lists:

Accepted Answer

A Trial Balance Worksheet lists all accounts, including both balance sheet accounts (assets, liabilities, equity) and income statement accounts (revenues and expenses). It also includes Retained Earnings at the beginning of the accounting period and dividends declared, which are important for ensuring the balance of the equation, Assets = Liabilities + Equity.

Question 13

Doorglam paid $91,000 for office furniture. The furniture is depreciated using the straight-line method and has an estimated service life of 7 years and no residual value. After three years of use, the accumulated depreciation of the furniture will be:

Accepted Answer

The annual depreciation expense is $91,000 / 7 = $13,000. After three years, the accumulated depreciation is 3 * $13,000 = $39,000.

Question 14

The dollar amount for Accounts Receivable in the Adjusted Trial Balance Debit column of a Trial Balance Worksheet is obtained by taking the:

Accepted Answer

The dollar amount for Accounts Receivable in the Adjusted Trial Balance Debit column is obtained by taking the Unadjusted Trial Balance Debit column plus the Debit Adjustments column minus the Credit Adjustments column. This is because the Adjusted Trial Balance reflects the changes made to the Unadjusted Trial Balance through adjusting entries, which may include increases or decreases in Accounts Receivable. Therefore, we need to add the Debit Adjustments column (which includes any increases to Accounts Receivable) and subtract the Credit Adjustments column (which includes any decreases to Accounts Receivable) from the Unadjusted Trial Balance Debit column to arrive at the correct dollar amount for Accounts Receivable in the Adjusted Trial Balance Debit column.

Question 15

On October 1, McReady Company paid six months' insurance in advance totaling $7800. The policy begins on October 1. An adjusted trial balance prepared on December 31 would include a balance in the Prepaid Insurance account of:

Accepted Answer

The insurance covers six months, so each month costs $1300 ($7800/6). By December 31, three months have passed, so $3900 worth of insurance has been used, leaving $3900 in the Prepaid Insurance account.

Question 16

Deere Company holds a $4800 note receivable dated July 1, 2015, with 10% interest. What adjusting entry is needed on December 31, 2015?

Accepted Answer

The interest for 6 months (July 1 to December 31) is $4800 * 10% * (6/12) = $240. Therefore, the adjusting entry is to debit Interest Receivable and credit Interest Revenue for $240.

Question 17

A company started the year with $300 of supplies. During the year the company purchased additional supplies costing $1800. There were $1000 of supplies on hand at the end of the year. An adjusted trial balance, prepared at the end of the accounting period, will show the following balance in Supplies Expense:

Accepted Answer

The answer of A company started the year with $300...

Question 18

At December 31, the NBC Company owes an employee for four days of work that will not be paid until January 5th. The weekly rate of pay for a five-day workweek is $800. The adjusting entry to record the accrued wages will include a:

Accepted Answer

The employee is owed for four days of work, which is 4/5 of the weekly pay. The weekly pay is $800, so the accrued wages are 4/5 * $800 = $640. The adjusting entry should debit Salaries Expense for $640 to recognize the expense incurred during the period.

Question 19

A Trial Balance Worksheet can be used to prepare:

Accepted Answer

A Trial Balance Worksheet is used to prepare all three financial statements - balance sheet, income statement, and statement of retained earnings.

Question 20

A company started the year with $300 of supplies. During the year, the company purchased an additional $1200 of supplies. There were $500 of supplies on hand at the end of the year. An adjusting entry prepared at the end of the accounting period includes a:

Accepted Answer

The supplies used during the year is $1000 ($300 beginning + $1200 purchased - $500 ending), so Supplies Expense is debited for $1000.

Quiz 3: Accrual Accounting Income