Question 1

What is the proper adjusting entry at June 30, the end of the fiscal year, based on a prepaid insurance account balance before adjustment, € 20,500, and unexpired amounts per analysis of policies of € 6,000?

Accepted Answer

The proper adjusting entry for prepaid insurance is to debit Insurance Expense for the unexpired portion of the prepaid insurance (€ 6,000) and credit Prepaid Insurance for the same amount. The remaining balance of Prepaid Insurance (€ 20,500 - € 6,000 = € 14,500) should be carried forward to the next period as a current asset. Therefore, option D is the correct answer.

Question 2

A new accountant working for Unitas Company records $800 Depreciation Expense on store equipment as follows:  The effect of this entry is to

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The answer of A new accountant working for Unitas Company...

Question 3

Prepaid expenses are

Accepted Answer

Prepaid expenses are expenses that are paid and recorded in an asset account before they are used or consumed. Examples of prepaid expenses include prepaid rent, prepaid insurance, and prepaid advertising. These expenses are initially recorded as an asset on the balance sheet and then expensed over the period in which they are used or consumed.

Question 4

If an adjustment is needed for unearned revenues, the

Accepted Answer

The answer of If an adjustment is needed for unearned...

Question 5

Depreciation is the process of

Accepted Answer

Depreciation is the process of allocating the cost of an asset to expense over its useful life in a rational and systematic manner. Option A is incorrect because fair value is not necessarily related to depreciation. Option B is incorrect because increasing the value of an asset is contrary to the concept of depreciation. Option D is incorrect because depreciation does not involve writing down an asset to its real value each accounting period.

Question 6

Bee-In-The-Bonnet Company purchased office supplies costing $8,000 and debited Office Supplies for the full amount.At the end of the accounting period, a physical count of office supplies revealed $3,200 still on hand.The appropriate adjusting journal entry to be made at the end of the period would be

Accepted Answer

The answer of Bee-In-The-Bonnet Company purchased office supplies costing $8,000...

Question 7

Accumulated Depreciation is

Accepted Answer

Accumulated Depreciation is a contra asset account, as it represents the accumulated amount of depreciation charged against an asset over its useful life. As a contra asset account, it has a credit balance and is subtracted from the related asset account on the balance sheet.

Question 8

At December 31, 2011, before any year-end adjustments, Cable Car Company's Insurance Expense account had a balance of $1,450 and its Prepaid Insurance account had a balance of $3,800.It was determined that $3,000 of the Prepaid Insurance had expired.The adjusted balance for Insurance Expense for the year would be

Accepted Answer

The answer of At December 31, 2011, before any year-end...

Question 9

If a company fails to make an adjusting entry to record supplies expense, then

Accepted Answer

The answer of If a company fails to make an...

Question 10

Accrued expenses are

Accepted Answer

Accrued expenses are expenses that have been incurred but not yet paid or recorded. Option A and B refers to prepaid expenses, which are expenses that have been paid and recorded in an asset account before they are used or consumed. Option D refers to expenses that have already been paid or recorded, which are not accrued expenses.

Question 11

Action Real Estate received a check for $18,000 on July 1 which represents a 6 month advance payment of rent on a building it rents to a client.Unearned Rent was credited for the full $18,000.Financial statements will be prepared on July 31.Action Real Estate should make the following adjusting entry on July 31:

Accepted Answer

The answer of Action Real Estate received a check for...

Question 12

A company usually determines the amount of supplies used during a period by

Accepted Answer

The amount of supplies used during a period is determined by taking the difference between the balance of the Supplies account at the beginning of the period (plus any purchases during the period) and the cost of supplies on hand at the end of the period. This method accounts for any supplies used during the period.

Question 13

The balance in the office supplies account on June 1 was $5,200, supplies purchased during June were $2,500, and the supplies on hand at June 30 were $2,000.The amount to be used for the appropriate adjusting entry is

Accepted Answer

The answer of The balance in the office supplies account...

Question 14

Depreciation expense for a period is computed by taking the

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The answer of Depreciation expense for a period is computed...

Question 15

Unearned revenues are

Accepted Answer

Unearned revenues are payments received in advance for products or services that have not yet been provided or earned. Therefore, they are received and recorded as liabilities before they are earned.

Question 16

A liability-revenue relationship exists with

Accepted Answer

Unearned revenue adjusting entries involve recognizing revenue that has been received in advance, which creates a liability for the business until the services or products have been delivered. Therefore, a liability-revenue relationship exists in unearned revenue adjusting entries. The other options (prepaid expense, accrued expense, and accrued revenue adjusting entries) do not involve recognizing revenue and do not create a direct liability-revenue relationship.

Question 17

As prepaid expenses expire with the passage of time, the correct adjusting entry will be a

Accepted Answer

Prepaid expenses are initially recorded as assets, but as they expire with the passage of time, they become expenses. Therefore, the correct adjusting entry is to debit an expense account and credit the asset account.

Question 18

Which of the following reflect the balances of prepayment accounts prior to adjustment?

Accepted Answer

Prepayment accounts represent expenses that have been paid in advance and recorded as assets on the statement of financial position. However, because the expense has not yet been incurred, the income statement accounts are understated. Therefore, the statement of financial position accounts are overstated and the income statement accounts are understated prior to adjustment.

Question 19

Hercules Company purchased a computer for $3,600 on December 1.It is estimated that annual depreciation on the computer will be $720.If financial statements are to be prepared on December 31, the company should make the following adjusting entry:

Accepted Answer

The adjusting entry should reflect the depreciation expense for the period, which is $720 per year divided by 12 months, resulting in $60 for one month. Since the computer was only in use for one month, the company should record Depreciation Expense of $60 and increase the contra-asset account Accumulated Depreciation by $60. Option A is incorrect because it credits Accumulated Depreciation for the full estimated annual depreciation, which is not accurate for the one-month period. Option C is incorrect as it also credits Accumulated Depreciation for the full estimated annual depreciation of $720 multiplied by 4 months (December to March), which is not accurate for one month. Option D is also incorrect as it does not reflect the depreciation for the period, but rather suggests reversing the initial asset purchase transaction.

Question 20

An asset-expense relationship exists with

Accepted Answer

Prepaid expense adjusting entries establish an asset-expense relationship because they involve recording expenses that have been paid in advance and are recognized as assets until the benefit is actually consumed or the service period lapses, at which point they are expensed.

Quiz 3: Adjusting the Accounts