Question 1

At the end of the current year, the accountant for Navistar Graphics forgot to make an adjusting entry to accrue Wages payable to the company's employees for the last week in December. The wages will be paid to the employees in January. Which of the following is one of the effects of this error?
A)Liabilities are overstated.
B)Profit is understated.
C)Expenses are overstated.
D)Profit is overstated.

Accepted Answer

The failure to accrue wages payable results in understating expenses for the current year, which in turn overstates the profit.

Question 2

Entries that record an expense before the cash is paid are:
A)prepaid expenses.
B)accrued expenses.
C)unearned revenues.
D)accrued revenues.

Accepted Answer

Accrued expenses are expenses that have been incurred but not yet paid.

Question 3

The accountant for Noble Jewellery Repair Services forgot to make an adjusting entry for Depreciation expense for the current year. Which of the following is one of the effects of this error?
A)Total assets are understated.
B)Profit is overstated.
C)Total liabilities are understated.
D)Profit is understated.

Accepted Answer

Depreciation expense reduces profit. If it is not recorded, profit will be overstated.

Question 4

What is the effect of the adjusting entry for Depreciation expense?
A)The entry decreases total liabilities and increases total expenses.
B)The entry decreases total assets and increases total expenses.
C)The entry increases total assets and increases total expenses.
D)The entry increases total liabilities and increases total expenses.

Accepted Answer

The adjusting entry for depreciation expense decreases total assets by increasing accumulated depreciation (a contra-asset account) and increases total expenses by recording depreciation expense.

Question 5

Unearned revenue would be classified as a(n)account.
A)equity
B)asset
C)liability
D)revenue

Accepted Answer

Unearned revenue is classified as a liability because it represents money received before services are performed or goods are delivered, creating an obligation to the customer.

Question 6

The entry to record depreciation includes a credit to which account?
A)Equipment
B)Depreciation expense
C)Accumulated depreciation
D)Cash

Accepted Answer

The entry to record depreciation includes a credit to Accumulated Depreciation, which is a contra-asset account that offsets the Equipment account.

Question 7

Accrued revenue is revenue that:
A)will be collected and earned in the future.
B)has been collected and earned.
C)the business has earned, but not collected.
D)the business has collected, but not yet earned.

Accepted Answer

Accrued revenue is revenue that the business has earned but has not yet collected.

Question 8

An adjusting entry that credits Salaries payable is an example of a(n):
A)unearned revenue.
B)accrued revenue.
C)prepaid expense.
D)accrued expense.

Accepted Answer

An adjusting entry that credits Salaries payable is an example of an accrued expense, as it recognizes expenses that have been incurred but not yet paid.

Question 9

An adjusting entry that debits Accounts receivable is an example of a(n):
A)accrued expense.
B)accrued revenue.
C)unearned revenue.
D)prepaid expense.

Accepted Answer

An adjusting entry that debits Accounts Receivable is made to record revenue that has been earned but not yet billed or received, which is an example of accrued revenue.

Question 10

An entry that reflects the using up of a portion of a fixed asset's value would be a(n) entry.
A)prepaid expense
B)depreciation
C)accrued expense
D)accrued revenue

Accepted Answer

Depreciation is an accounting entry that reflects the using up of a portion of a fixed asset's value.

Question 11

Robert Rogers, CPA performed accounting services for a client in June. A bill was mailed to the client on 29 June. Roberts received a cheque in the mail on 5 July. Which of the following accounts would appear on the income statement for the year ended 30 June?
A)Service revenue
B)Prepaid expense
C)Unearned revenue
D)Accounts payable

Accepted Answer

Service revenue would appear on the income statement for the year ended 30 June because the accounting services were performed in June, and revenue is recognized when earned under the accrual basis of accounting.

Question 12

Unearned revenue is revenue that:
A)has been collected and earned.
B)the business has earned, but not collected.
C)the business has collected, but not yet earned.
D)will be collected and earned in the future.

Accepted Answer

Unearned revenue is money received by a business for goods or services that have not yet been delivered or performed.

Question 13

The accountant for Noble Jewellery Repair Services forgot to make an adjusting entry for Depreciation expense for the current year. What is the effect of this error on total assets?
A)Total assets are understated.
B)Total assets are overstated.
C)Total assets are not affected.
D)There is not enough information presented to answer the question.

Accepted Answer

Depreciation expense reduces the book value of assets. If it is not recorded, total assets will be overstated.

Question 14

If an adjusting entry includes a debit to Rent expense, that would indicate that the payment of rent had been previously recorded as a(n)entry.
A)accrued revenue
B)depreciation
C)prepaid expense
D)accrued expense

Accepted Answer

The debit to Rent Expense indicates that the rent was initially recorded as a Prepaid Expense, which is an asset. The adjusting entry recognizes the expense as it is incurred.

Question 15

Which of the following accounts would NOT be adjusted at the end of an accounting period?
A)Unearned revenue
B)Accounts receivable
C)Equipment
D)Prepaid insurance

Accepted Answer

Equipment is a long-term asset and is not typically adjusted at the end of an accounting period unless there is a need for impairment or revaluation, which is not a regular period-end adjustment.

Question 16

Entries that record revenues earned before the cash is collected are:
A)accrued revenues.
B)accrued expenses.
C)prepaid expenses.
D)unearned revenues.

Accepted Answer

Accrued revenues are revenues that have been earned but not yet received in cash or recorded.

Question 17

The entry to record depreciation includes a debit to which account?
A)Cash
B)Depreciation expense
C)Equipment
D)Accumulated depreciation

Accepted Answer

Depreciation expense is debited to record depreciation.

Question 18

Which of the following is a contra account?
A)Accumulated depreciation
B)Unearned revenue
C)Earned revenue
D)Depreciation expense

Accepted Answer

Accumulated depreciation is a contra asset account that reduces the total value of a company's fixed assets on the balance sheet.

Question 19

Real Losers, a diet magazine, collected $360 000 in subscription revenue in May. Each subscriber will receive an issue of the magazine for each of the next 12 months, beginning with the June issue. The company uses the accrual method of accounting. What is the balance in the Unearned revenue account at the end of December?
A)$0
B)$330 000
C)$360 000
D)$150 000

Accepted Answer

The answer of Real Losers, a diet magazine, collected $360...

Question 20

Real Losers, a diet magazine, collected $360 000 in subscription revenue in May. Each subscriber will receive an issue of the magazine for each of the next 12 months, beginning with the June issue. The company uses the accrual method of accounting. By the end of December, how much Subscription revenue has been earned?
A)$120 000
B)$210 000
C)$12 000
D)$360 000

Accepted Answer

By the end of December, 7 months of the subscription period have passed (June to December). Therefore, the earned subscription revenue is (7/12) of $360,000, which is $210,000.

Quiz 3: The Adjusting Process

At the end of the current year, the accountant for Navistar Graphics forgot to make an adjusting entry to accrue Wages payable to the company's employees for the last week in December. The wages will be paid to the employees in January. Which of the following is one of the effects of this error?

Entries that record an expense before the cash is paid are:

The accountant for Noble Jewellery Repair Services forgot to make an adjusting entry for Depreciation expense for the current year. Which of the following is one of the effects of this error?

What is the effect of the adjusting entry for Depreciation expense?

Unearned revenue would be classified as a(n) account.

The entry to record depreciation includes a credit to which account?

Accrued revenue is revenue that:

An adjusting entry that credits Salaries payable is an example of a(n) :

An adjusting entry that debits Accounts receivable is an example of a(n) :

An entry that reflects the using up of a portion of a fixed asset's value would be a(n) entry.

Robert Rogers, CPA performed accounting services for a client in June. A bill was mailed to the client on 29 June. Roberts received a cheque in the mail on 5 July. Which of the following accounts would appear on the income statement for the year ended 30 June?

Unearned revenue is revenue that:

The accountant for Noble Jewellery Repair Services forgot to make an adjusting entry for Depreciation expense for the current year. What is the effect of this error on total assets?

If an adjusting entry includes a debit to Rent expense, that would indicate that the payment of rent had been previously recorded as a(n) entry.

Which of the following accounts would NOT be adjusted at the end of an accounting period?

Entries that record revenues earned before the cash is collected are:

The entry to record depreciation includes a debit to which account?

Which of the following is a contra account?