Question 1

An adjusted trial balance is completed to check that debits still equal credits after the income statement is prepared.

Accepted Answer

False

Question 2

The purpose of adjusting entries is to transfer net income and dividends to Retained Earnings.

Accepted Answer

The purpose of adjusting entries is to ensure that the financial statements are accurate and up-to-date by recording any necessary changes in revenue, expenses, assets, liabilities, and equity. These entries do not transfer net income and dividends to Retained Earnings directly; rather, they account for any income or expenses that have not yet been recorded and ensure that the financial statements reflect the correct balances and values. Net income and dividends are typically transferred to Retained Earnings via closing entries at the end of the accounting period.

Question 3

Adjusting entries often involve cash.

Accepted Answer

Adjusting entries are made to ensure that the accounts are accurately reflected in the financial statements at the end of an accounting period. They do not necessarily involve cash transactions, as they can involve accruals, depreciation, inventory adjustments, and other non-cash items.

Question 4

As a company uses supplies,an adjustment should be made to decrease an asset account and increase an expense account.

Accepted Answer

This is correct because supplies are an asset and when they are used, they decrease in value, which means the asset account should be decreased. Additionally, using supplies incurs an expense, which means an expense account should be increased.

Question 5

The amount charged for a good or service provided to a customer on account is recorded only after the payment is received.

Accepted Answer

The amount charged for a good or service provided to a customer on account is recorded as accounts receivable when the sale is made, not when the payment is received. The payment is recorded as a separate transaction once it is received.

Question 6

If a company forgot to record depreciation on equipment for a period,Total Assets would be overstated and Total Stockholders' Equity would be understated on the balance sheet.

Accepted Answer

If depreciation is not recorded, Total Assets would be overstated, but Total Stockholders' Equity would also be overstated, not understated, because expenses (which reduce equity) are understated.

Question 7

The temporary accounts will have zero balances in a post-closing trial balance.

Accepted Answer

Temporary accounts, such as revenue, expenses, and dividends, are closed at the end of the accounting period and their balances are transferred to the retained earnings account. As a result, these accounts will have zero balances in the post-closing trial balance.

Question 8

The closing process includes a transfer of the Dividends account balance to the Retained Earnings account.

Accepted Answer

This is true. At the end of an accounting period, any dividends that were declared and paid to shareholders are transferred from the Dividends account to the Retained Earnings account. This is because dividends represent a distribution of profits, which ultimately reduce the amount of earnings that are retained by the company.

Question 9

If the Retained Earnings account is debited for $4,000 in the closing process,the company had a net income of $4,000.

Accepted Answer

Debiting the Retained Earnings account during the closing process indicates a decrease, which typically occurs when there is a net loss or dividends are paid, not a net income.

Question 10

Corporate income taxes cannot be calculated until all other adjustments are made.

Accepted Answer

Corporate income taxes are calculated based on the company's taxable income, which is determined after all other adjustments such as deductions and credits are taken into account. Therefore, corporate income taxes cannot be accurately calculated until all other adjustments are made.

Question 11

If a contra account of $20,000 is mistakenly included in the same column of the trial balance as the account it offsets,the error will cause the debit and credit column totals to differ by $40,000.

Accepted Answer

The answer of If a contra account of $20,000 is...

Question 12

The asset,liability,and stockholders' equity accounts are referred to as permanent accounts.

Accepted Answer

Permanent accounts carry over from year to year and are not closed at the end of the accounting period. Examples include assets, liabilities, and stockholders' equity accounts.

Question 13

Depreciation is a measure of the decline in market value of an asset.

Accepted Answer

The answer of Depreciation is a measure of the decline...

Question 14

The carrying value of an asset is an approximation of the asset's market value.

Accepted Answer

The carrying value of an asset is its original cost less accumulated depreciation or impairment. It may not necessarily reflect the asset's market value.

Question 15

When a company pays its rent in advance,an asset is reported on the balance sheet.

Accepted Answer

When a company pays its rent in advance, it creates a prepaid rent asset on the balance sheet. This asset will be gradually expensed over the period of time it covers, typically in equal amounts each period.

Question 16

A deferral adjustment may involve one asset and one expense account.

Accepted Answer

A deferral adjustment is made to defer the recognition of revenue or expense to a later period. This typically involves adjusting one asset account and one expense account. For example, if a company receives payment for services it will provide in the future, it will recognize the payment as a liability (an asset account) and then gradually recognize the revenue as it provides the services (an expense account).

Question 17

If a company forgot to prepare an adjusting entry to record salaries and wages incurred but unpaid at the end of the period,Total Liabilities would be understated and Retained Earnings would be overstated on the Balance Sheet.

Accepted Answer

If the company forgot to prepare the adjusting entry to record salaries and wages incurred but unpaid at the end of the period, the company's Total Liabilities would be understated because the unpaid amount is a liability that should be recorded. At the same time, Retained Earnings would be overstated because the company would have recognized more expenses than actually incurred, resulting in higher net income and, consequently, higher retained earnings.

Question 18

The amounts of all the accounts reported on the balance sheet can be taken from the adjusted trial balance.

Accepted Answer

The answer of The amounts of all the accounts reported...

Question 19

One of the purposes of the closing entries is to bring the balances in all asset,liability,revenue,and expense accounts down to zero to start the next accounting period.

Accepted Answer

The answer of One of the purposes of the closing...

Question 20

A contra account is added to the account it offsets.

Accepted Answer

The answer of A contra account is added to the...

Quiz 4: Adjustments,financial Statements,and Financial Results