Question 1

Recording the payment of an account payable twice will result in the

Accepted Answer

Recording the payment of an account payable twice will reduce both cash (an asset) and accounts payable (a liability) twice, leading to an understatement of both total assets and total liabilities.

Question 2

Which of the following is NOT a reason for problems occurring in the financial statements?

Accepted Answer

Safeguards are put in place to prevent problems from occurring in financial statements, so it is not a reason for problems to occur. Fraud, disagreement, and errors, on the other hand, can all contribute to issues in financial statements.

Question 3

Recording the collection of accounts receivable by debiting Cash and crediting Revenue

Accepted Answer

Recording the collection of accounts receivable by debiting Cash and crediting Revenue incorrectly increases both cash and revenue, leading to an overstatement of assets. The correct entry should be a debit to Cash and a credit to Accounts Receivable.

Question 4

If the total amount for Rent Expense is inadvertently posted to Prepaid Rent at the end of the year, what will be the effect on the year-end financial statements?

Accepted Answer

The answer of If the total amount for Rent Expense...

Question 5

A company purchased a two-year insurance policy on September 1, debiting Prepaid Insurance for the full amount. If no adjusting entry is made at the end of the year, how does this affect the year-end financial statements?

Accepted Answer

If no adjusting entry is made to account for the portion of the insurance policy that has expired during the year, the Prepaid Insurance account will continue to show the full amount of the policy as an asset on the balance sheet at the end of the year. This overstates the amount of assets, as a portion of the prepaid insurance has already been used up, and should be recognized as an expense.

Question 6

Recording $130 of insurance expense as advertising expense will result in

Accepted Answer

Recording insurance expense as advertising expense does not affect the total amount of expenses, only the classification. Therefore, none of the options correctly describe the impact on assets or expenses.

Question 7

Failure to record the used portion of supplies on hand during the month has the following effect on the financial statements prepared at the end of the month

Accepted Answer

Not recording the used portion of supplies results in an overstatement of assets because the supplies account will show a higher balance than what is actually available.

Question 8

Which of the following statements is true about errors in the financial statements of a company?

Accepted Answer

Errors in financial statements are unintentional and typically occur as a result of misunderstandings, oversights, or mistakes in recording or posting transactions. Once detected, they should be immediately corrected to ensure the accuracy and reliability of the company's financial reports. It is important to note that intentional errors made with the intention of fraud are considered fraudulent activities and not just errors.

Question 9

A collection of an account receivable was erroneously recorded and posted as a debit to Cash and a credit to Consulting Fees Revenue. The journal entry to correct this error would be

Accepted Answer

The error was that the account receivable was recorded as revenue, which means Consulting Fees Revenue was overstated. To correct the error, we need to decrease Consulting Fees Revenue by debiting it, and increase Accounts Receivable by crediting it. Therefore, the correct entry is a debit to Consulting Fees Revenue and a credit to Accounts Receivable, as shown in option D. Options A, B and C are not correct as they do not correct the error in the original entry.

Question 10

A purchase of $1,600 of supplies for cash was incorrectly journalized and posted as a $1,600 debit to Supplies Expense and a $1,600 credit to cash. The entry to correct this error is

Accepted Answer

The incorrect journal entry has increased the expense and decreased the asset. To correct this error, we need to increase the asset and decrease the expense. Therefore, we need to debit Supplies on Hand (an asset account) by $1,600 to increase the asset and credit Supplies Expense (an expense account) by $1,600 to decrease the expense.

Question 11

Which one of the following errors causes net income to be overstated?

Accepted Answer

Failure to record depreciation expense causes net income to be overstated because it reduces the expenses and increases the asset's carrying value, which results in higher net income.

Question 12

If the total amount for Insurance Expense is inadvertently posted to Prepaid Insurance at the end of the year, what will be the effect on the year-end financial statements?

Accepted Answer

If Insurance Expense is posted to Prepaid Insurance, expenses are understated, leading to overstated net income and thus overstated owner's equity.

Question 13

Failure to record the expired amount of prepaid rent expense

Accepted Answer

The answer of Failure to record the expired amount of...

Question 14

If a company does NOT record accrued wages expense at the end of the year, how does this affect the year-end financial statements?

Accepted Answer

Not recording accrued wages expense understates liabilities and expenses, leading to an overstatement of owner's equity.

Question 15

If the total amount for Insurance Expense is inadvertently posted to Prepaid Insurance at the end of the year, what will be the effect on the year-end financial statements?

Accepted Answer

The insurance expense being posted to prepaid insurance will result in expenses being understated, net income being overstated, and consequently, owner's equity being overstated.

Question 16

If the total amount for Rent Expense is inadvertently posted to Prepaid Rent at the end of the year, what will be the effect on the year-end financial statements?

Accepted Answer

If the total amount for Rent Expense is posted to Prepaid Rent at the end of the year, assets will be overstated because Prepaid Rent is an asset account. This error will not affect expenses, revenues, or owner's equity.

Question 17

Blake Co. provided $5,000 of consulting services to Simmons Co. for which they have not yet received payment. When Blake billed Simmons for the consulting services, Blake mistakenly journalized and posted the transaction as a $5,000 debit to Accounts Receivable and a $5,000 credit to Unearned Consulting Fees. The entry Blake needs to make to correct this error is

Accepted Answer

The correct entry to correct the error is to debit Unearned Consulting Fees and credit Consulting Fees Earned for $5,000. This will reverse the incorrect entry and record the transaction correctly.

Question 18

If rent for 2012 is paid in advance during 2011 but is mistakenly debited to Rent Expense in 2011,

Accepted Answer

Since the rent payment was mistakenly debited to Rent Expense in 2011, expenses in 2011 were overstated, leading to an understated net income. The rent payment should have been recorded as a prepaid expense, which would have been recognized as an asset until the rent was actually due in 2012. Therefore, the mistake leads to an understatement of net income for 2011.

Question 19

Recording Rent Expense as Wage Expense

Accepted Answer

Recording rent expense as wage expense does not affect the total expenses or income, it only misclassifies the type of expense. Therefore, none of the options correctly describe the impact.

Question 20

Which one of the following errors causes net income to be understated?

Accepted Answer

Failure to record revenue earned but not billed will cause net income to be understated because the revenue that should have been recognized in the period would not have been recorded, thus lowering the reported net income.

Quiz 5: Internal Controls: Ensuring the Integrity of Financial Information

Recording the payment of an account payable twice will result in the

Which of the following is NOT a reason for problems occurring in the financial statements?

Recording the collection of accounts receivable by debiting Cash and crediting Revenue

If the total amount for Rent Expense is inadvertently posted to Prepaid Rent at the end of the year, what will be the effect on the year-end financial statements?

A company purchased a two-year insurance policy on September 1, debiting Prepaid Insurance for the full amount. If no adjusting entry is made at the end of the year, how does this affect the year-end financial statements?

Recording $130 of insurance expense as advertising expense will result in

Failure to record the used portion of supplies on hand during the month has the following effect on the financial statements prepared at the end of the month

Which of the following statements is true about errors in the financial statements of a company?

A collection of an account receivable was erroneously recorded and posted as a debit to Cash and a credit to Consulting Fees Revenue. The journal entry to correct this error would be

A purchase of $1,600 of supplies for cash was incorrectly journalized and posted as a $1,600 debit to Supplies Expense and a $1,600 credit to cash. The entry to correct this error is

Which one of the following errors causes net income to be overstated?

If the total amount for Insurance Expense is inadvertently posted to Prepaid Insurance at the end of the year, what will be the effect on the year-end financial statements?

Failure to record the expired amount of prepaid rent expense

If a company does NOT record accrued wages expense at the end of the year, how does this affect the year-end financial statements?

If the total amount for Insurance Expense is inadvertently posted to Prepaid Insurance at the end of the year, what will be the effect on the year-end financial statements?

If the total amount for Rent Expense is inadvertently posted to Prepaid Rent at the end of the year, what will be the effect on the year-end financial statements?

If rent for 2012 is paid in advance during 2011 but is mistakenly debited to Rent Expense in 2011,

Recording Rent Expense as Wage Expense

Which one of the following errors causes net income to be understated?