Question 1

Darting Company purchased equipment for $9,000 on January 1, 2022.The company expects to use the equipment for 3 years.It has no salvage value.Monthly depreciation expense on the asset is:

Accepted Answer

The equipment cost is $9,000 and it is expected to be used for 3 years (36 months). The monthly depreciation expense is calculated by dividing the total cost by the number of months: $9,000 / 36 = $250.

Question 2

At March 1, I.Repo Inc.reported a balance in Supplies of $200.During March, the company purchased supplies for $950 and consumed supplies of $800.If no adjusting entry is made for supplies:

Accepted Answer

If no adjusting entry is made, the consumed supplies of $800 will not be recorded as an expense, leading to an overstatement of stockholders' equity by $800.

Question 3

The fiscal year opened for Noland Manufacturing with a $2,700 balance in its prepaid insurance account.They purchased $9,600 in insurance policies during the year.If $1,725 of insurance has expired during the year, what is the year-end balance in the prepaid insurance account?

Accepted Answer

The answer of The fiscal year opened for Noland Manufacturing...

Question 4

Fleet Services Company purchased equipment for $12,000 on January 1, 2022.The company expects to use the equipment for 5 years.It has no salvage value.What balance would be reported on the December 31, 2022 balance sheet for Accumulated Depreciation?

Accepted Answer

The equipment is depreciated over 5 years with no salvage value, so the annual depreciation is $12,000 / 5 = $2,400. After one year, the accumulated depreciation is $2,400.

Question 5

LR Corporation is a cash basis business.LR signed a six-month, 12% note payable of $10,000 on October 1, 2022.By recording the interest expense related to the note only when it is paid on April 1, 2023, LR will understate expenses by ________ on its year-end financial statements on December 31, 2022.

Accepted Answer

The interest for three months (October to December) is $300, which should be recognized as an expense in 2022.

Question 6

Regions Inc.pays its rent of $60,000 annually on January 1 and makes monthly adjusting entries.If the February 28 monthly adjusting entry for prepaid rent is omitted, which of the following are true?

Accepted Answer

The answer of Regions Inc.pays its rent of $60,000 annually...

Question 7

Masterfalls Corporation purchased a one-year insurance policy in January 2021 for $36,000.The insurance policy is in effect from March 2021 through February 2022.If the company neglects to make the proper year-end adjustment for the expired insurance:

Accepted Answer

By the end of December 2021, 10 months of the insurance policy have expired, amounting to $30,000. If no adjustment is made, expenses are understated and both net income and assets are overstated by this amount.

Question 8

Foley Marketing received $60,000 from a customer on January 2, 2022 to be on retainer for the next two years.The appropriate journal entry to recognize revenue at Foley's fiscal year-end on December 31, 2022 would be:

Accepted Answer

Foley Marketing should recognize half of the $60,000 as revenue for the first year, which is $30,000. The correct entry is to debit Unearned Service Revenue and credit Service Revenue to reflect the earned portion.

Question 9

Merando Industries employs a five-day workweek and a September 30 year-end.Normal weekly wages amount to $35,000.If September 30 is a Wednesday, what is the appropriate journal entry on October 2, the next payday for Merando?

Accepted Answer

The wages for Monday to Wednesday (3 days) are accrued at year-end, totaling $21,000. On October 2, the company pays the full week's wages, so $14,000 is expensed for Thursday and Friday, and $21,000 is paid from the accrued liability.

Question 10

Merando Industries employs a five-day workweek and a September 30 year-end.Normal weekly wages amount to $36,000.If September 30 ends on a Wednesday, what is the appropriate journal entry at fiscal year-end?

Accepted Answer

The company owes wages for three days (Monday to Wednesday) out of the five-day workweek, which is 3/5 of $36,000, equaling $21,600.

Question 11

Skypress Company collected $11,200 in September of 2021 for 4 months of service which would take place from October of 2021 through January of 2022.The revenue reported from this transaction during 2022 would be:

Accepted Answer

The revenue for 2022 would be $2,800 because only the service provided in January 2022 is recognized in 2022. The total amount is for 4 months, so $11,200/4 = $2,800 per month.

Question 12

Oakville Inc.purchased a 12-month insurance policy on March 1, 2022 for $2,400.At March 31, 2022, the adjusting journal entry to record expiration of this asset will include:

Accepted Answer

The insurance expense for one month (March) is $200 ($2,400/12 months). The adjusting entry will debit Insurance Expense and credit Prepaid Insurance for $200 to reflect the expense incurred.

Question 13

Muldoon Advertising has an opening balance in its supplies account of $2,400 and purchases $3,000 of supplies during the year.A year-end physical count shows $2,800 in supplies inventory.Which is the appropriate journal entry at year end?

Accepted Answer

The supplies used during the year is the opening balance plus purchases minus the ending inventory: $2,400 + $3,000 - $2,800 = $2,600. Therefore, Supplies Expense is debited and Supplies is credited for $2,600.

Question 14

A customer paid $60,000 to Foley Marketing on December 30, 2020, to perform services from January 1, 2021 through December 31, 2024.If Foley fails to record the revenue that should be recognized, ________ would be understated by ________ each year.

Accepted Answer

The total payment of $60,000 is for services over four years, so $15,000 should be recognized as revenue each year. If Foley fails to record this, net income would be understated by $15,000 annually.

Question 15

Equipment was purchased by Noland Manufacturing on January 1, 2022, for $125,000.Noland's policy is to adjust its accounts at year-end.Which is the appropriate journal entry to record depreciation at year-end if the company expects to use equipment consistently for five years? In the choices below, as per convention, debits are listed first followed by credits.

Accepted Answer

The correct entry is to debit Depreciation Expense and credit Accumulated Depreciation for the annual depreciation amount, which is $25,000 ($125,000/5 years).

Question 16

At March 1, 2022, Candy Inc.had supplies on hand of $2,000.During the month, Candy purchased supplies of $2,900 and used supplies of $2,800.The March 31 balance sheet should report what balance in the supplies account?

Accepted Answer

The supplies on hand at the beginning of March were $2,000. Candy Inc. purchased an additional $2,900 worth of supplies during the month, making the total available supplies $4,900. After using $2,800 worth of supplies, the remaining balance in the supplies account is $2,100.

Question 17

Walton Company collected $14,400 in May of 2021 for 4 months of service which would take place from October of 2021 through January of 2022.The revenue reported from this transaction during 2021 would be:

Accepted Answer

The revenue for 2021 includes services provided from October to December, which is 3 months. Therefore, the revenue recognized in 2021 is $14,400 * (3/4) = $10,800.

Question 18

Green Realty Company received a check for $24,000 on July 1 which represents a 6 month advance payment of rent on a building it rents to a client.Unearned Rent Revenue was credited for the full $24,000.Financial statements will be prepared on July 31.Green Realty should make the following adjusting entry on July 31:

Accepted Answer

The $24,000 represents rent for 6 months, so $4,000 is earned each month ($24,000/6). On July 31, Green Realty should recognize one month's rent as earned by debiting Unearned Rent Revenue and crediting Rent Revenue for $4,000.

Question 19

Hoosher Enterprises purchased an 18-month insurance policy on May 31, 2022 for $10,800.The December 31, 2022 balance sheet would report Prepaid Insurance of:

Accepted Answer

The insurance policy covers 18 months, costing $10,800. By December 31, 2022, 7 months have passed, so the expense for these months is (7/18) * $10,800 = $4,200. The remaining prepaid insurance is $10,800 - $4,200 = $6,600.

Question 20

James & Younger Corporation purchased a one-year insurance policy in February 2021 for $42,000.The insurance policy is in effect from March 2021 through February 2022.If the company neglects to make the proper year-end adjustment for the expired insurance:

Accepted Answer

By the end of December 2021, 10 months of the insurance policy have expired, amounting to $35,000. If no adjustment is made, expenses are understated, leading to overstated net income and assets.

Quiz 4: Accrual Accounting Concepts