Question 1

The accountant for Sparks Electric Company failed to make an adjusting entry to record $3,000 of telephone expenses for the last two months of the year. Which of the following statements is true?
A)The total liabilities will be overstated.
B)The total liabilities will be understated.
C)The total assets will be overstated.
D)The total assets will be understated.

Accepted Answer

Failing to record the telephone expenses means that the liabilities (accounts payable or accrued expenses) are understated because the company owes this amount but hasn't recorded it.

Question 2

The accountant of Hobson Electrical Repair Company failed to make an adjusting entry to record $5,000 of unpaid salaries for the last two weeks of the year. Which of the following statements is true?
A)The total revenue will be overstated.
B)The total revenue will be understated.
C)The total expenses will be overstated.
D)The total expenses will be understated.

Accepted Answer

The unpaid salaries represent an expense that has been incurred in the current year but has not yet been paid. Failing to record this expense means that the total expenses will be understated, as the salaries expense was not taken into account. This will result in an overstatement of net income for the year.

Question 3

Patricia Event Planning Service collects fees from their customers in advance. On January 1, 2015, the balance of her Unearned Revenue account had a balance of $6,000 (Cr.). During January and February, she collected $3,000 and $1,000 as advance fees. During the two-month period, she rendered services of $6,500. What is the balance in Unearned Revenue at the end of February?
A)Debit balance of $6,000
B)Credit balance of $6,000
C)Debit balance of $3,500
D)Credit balance of $3,500

Accepted Answer

At the beginning of the period, the Unearned Revenue account had a credit balance of $6,000. In January, Patricia collected $3,000 as advance fees, increasing the balance to $9,000 (Cr.). In February, she collected $1,000, bringing the balance to $10,000 (Cr.). However, during the two-month period, she rendered services of $6,500, which reduces the balance of Unearned Revenue. Therefore, the ending balance of Unearned Revenue at the end of February is $3,500 (Cr.).

Question 4

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

Accepted Answer

The adjusting entry for Depreciation Expense decreases the value of the fixed asset account (an asset) and increases the expense account for Depreciation Expense (an expense). As a result, total assets decrease and total expenses increase. There is no effect on liabilities, so options A and D can be eliminated. Option B is incorrect because it suggests that the adjusting entry increases total assets, which is not the case as it only decreases the value of a specific asset account.

Question 5

The accounting records of Patricia Event Planning Service include the following select unadjusted balances on December 31, 2014: Salaries Expense, $6,000; Service Revenue: $20,000; Unearned Revenue, $400; Supplies Expense, $600; Rent Expense, $300; Depreciation Expense-Equipment, $200. Later in December, she worked with a new client and provided event planning services for an upcoming event. When the event is complete in January, 2015, she will collect the full amount of $1,200 from her client. As of the end of December, 2015, she rendered one-third of the services covered by the contract. She made the accrual adjustments. The final adjusted balance of Service Revenue, as shown on the adjusted trial balance, should be a:
A)debit balance of 21,200.
B)credit balance of $20,000.
C)debit balance of $1,200.
D)credit balance of $20,400.

Accepted Answer

The unadjusted balance of Service Revenue is $20,000. However, since Patricia rendered one-third of the services covered by the contract, the revenue recognized in December should only be $400 ($1,200 x 1/3). This amount should be added to the unadjusted balance to get the total service revenue earned for the period, which is $20,400 ($20,000 + $400). Therefore, the final adjusted balance of Service Revenue should be a credit balance of $20,400.

Question 6

At the end of the current year, the accountant for Colorful 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 an effect of this error?
A)Net income is overstated.
B)Liabilities are overstated.
C)Net income is understated.
D)Expenses are overstated.

Accepted Answer

The answer of At the end of the current year,...

Question 7

All of a company's accounts and their balances appear on the:
A)statement of retained earnings.
B)balance sheet.
C)adjusted trial balance.
D)income statement.

Accepted Answer

The adjusted trial balance lists all of a company's accounts and their balances after adjustments have been made, ensuring that debits equal credits.

Question 8

The accountant of Barnes Architectural Services failed to make an adjusting entry to record $7,000 of depreciation expense. Which of the following statements is true?
A)The total revenue will be overstated.
B)The total revenue will be understated.
C)The total expenses will be overstated.
D)The total expenses will be understated.

Accepted Answer

Since the accountant failed to record the depreciation expense, the total expenses will be understated. This means that the net income will be overstated.

Question 9

GAAP requires a public company to prepare a worksheet for financial reporting purposes.

Accepted Answer

GAAP does not require a public company to prepare a worksheet for financial reporting purposes. However, a worksheet may be prepared by the company for internal use to help organize and summarize financial information for financial reporting.

Question 10

The accountant for Noble Jewelry Repair Services forgot to make an adjusting entry for Depreciation Expense for the current year. Which of the following is an effect of this error?
A)Revenues are understated.
B)Total assets are understated.
C)Net income is overstated.
D)Total liabilities are understated.

Accepted Answer

If the accountant forgot to make an adjusting entry for Depreciation Expense, it means that the expense was not recognized, which results in an overstatement of net income. This occurs because depreciation expense is a non-cash expense that reduces net income but does not involve an outflow of cash. Therefore, the net income is overstated, and the financial statements do not reflect the company's true financial position.

Question 11

The accountant of Skyscrapers Architectural Services failed to make an adjusting entry to record $7,000 of depreciation expense. Which of the following statements is true?
A)The total liabilities will be overstated.
B)The equity will be understated.
C)The total assets will be overstated.
D)The total assets will be understated.

Accepted Answer

The answer of The accountant of Skyscrapers Architectural Services failed...

Question 12

Financial statements are prepared from the balances in a(n):
A)general journal.
B)chart of accounts.
C)unadjusted trial balance.
D)adjusted trial balance.

Accepted Answer

Financial statements are prepared from the adjusted trial balance, which includes all necessary adjustments made at the end of the accounting period. The general journal and chart of accounts are used to record transactions and organize accounts, while the unadjusted trial balance only lists the balances of accounts prior to any adjustments being made.

Question 13

A worksheet is an external document that forms a part of the financial statements.

Accepted Answer

A worksheet is a tool used by accountants to organize data and make adjustments before finalizing financial statements. It is not a part of the financial statements themselves.

Question 14

The accountant of Ovenly Inc. failed to make an adjusting entry to record $6,000 of unearned service revenue that has now been earned. Assume the unearned revenue was initially recorded as a liability. Which of the following statements is true?
A)The total revenue will be overstated.
B)The total revenue will be understated.
C)The total expenses will be overstated.
D)The total expenses will be understated.

Accepted Answer

If the adjusting entry is not made to record the earned revenue, the liability related to unearned revenue is not reduced and the income statement will not include the revenue earned. Therefore, the total revenue will be understated.

Question 15

The accountant for Noble Jewelry Repair Services forgot to make an adjusting entry for Depreciation Expense for the current year. Which of the following is an effect of this error?
A)Total assets are understated.
B)Revenues are overstated.
C)Total assets are overstated.
D)Net income is understated.

Accepted Answer

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

Question 16

On the first day of January, Patricia borrowed $2,000 on a one-year note payable bearing interest at 4% per year. The note specifies that principal and interest must be paid in full at the end of the one-year period. On June 30, the adjusted trial balance will show Interest Payable of:
A)$40 credit.
B)$40 debit.
C)$80 credit.
D)$80 debit.

Accepted Answer

Interest for six months is calculated as $2,000 * 4% * (6/12) = $40, which is recorded as a credit to Interest Payable.

Question 17

The worksheet is NOT a journal, a ledger, or a financial statement.

Accepted Answer

A worksheet is a tool used in the accounting process to organize and summarize data before preparing financial statements. It is not a journal, ledger, or financial statement itself.

Question 18

The accountant of Isabella Consulting Company failed to make an adjusting entry to record $6,000 for unearned service revenues that were earned before the end of the fiscal year. Assume the company initially recorded a liability. Which of the following statements is true?
A)The total liabilities will be overstated.
B)The total liabilities will be understated.
C)The total assets will be overstated.
D)The total assets will be understated.

Accepted Answer

The failure to adjust the unearned service revenue means that the liability remains on the books, even though the revenue has been earned. This results in an overstatement of total liabilities.

Question 19

The accountant of Linda Legal Services failed to make an adjusting entry for supplies that had been used for the year. Assume the supplies were initially recorded as an asset. Which of the following statements is true?
A)The total liabilities will be overstated.
B)The equity will be understated.
C)The total assets will be overstated.
D)The total assets will be understated.

Accepted Answer

The supplies were initially recorded as an asset, and failing to adjust for supplies used means that the asset account is not reduced, leading to an overstatement of total assets.

Question 20

The salaries are $6,000 per week of 5 working days and are paid weekly at the end of Fridays. The end of the month falls on a Thursday. Patricia made the appropriate accrual adjustment and posted it to the ledger. The final adjusted balance of Salaries Payable, as shown on the adjusted trial balance, will be a: (Assume that there was no beginning balance in the Salaries Payable account.)
A)credit balance of $4,800.
B)debit balance of $1,200.
C)debit balance of $4,800.
D)credit balance of $1,200.

Accepted Answer

The salaries are paid weekly at the end of Fridays, and the end of the month falls on a Thursday. This means that there are 4 days of unpaid salaries at the end of the month. The amount of unpaid salaries is $6,000 per week / 5 working days * 4 days = $4,800. The accrual adjustment will increase the Salaries Payable account by $4,800, resulting in a credit balance of $4,800.

Quiz 3: The Adjusting Process

The accountant for Sparks Electric Company failed to make an adjusting entry to record $3,000 of telephone expenses for the last two months of the year. Which of the following statements is true?

The accountant of Hobson Electrical Repair Company failed to make an adjusting entry to record $5,000 of unpaid salaries for the last two weeks of the year. Which of the following statements is true?

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

At the end of the current year, the accountant for Colorful 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 an effect of this error?

All of a company's accounts and their balances appear on the:

The accountant of Barnes Architectural Services failed to make an adjusting entry to record $7,000 of depreciation expense. Which of the following statements is true?

GAAP requires a public company to prepare a worksheet for financial reporting purposes.

The accountant for Noble Jewelry Repair Services forgot to make an adjusting entry for Depreciation Expense for the current year. Which of the following is an effect of this error?

The accountant of Skyscrapers Architectural Services failed to make an adjusting entry to record $7,000 of depreciation expense. Which of the following statements is true?

Financial statements are prepared from the balances in a(n) :

A worksheet is an external document that forms a part of the financial statements.

The accountant of Ovenly Inc. failed to make an adjusting entry to record $6,000 of unearned service revenue that has now been earned. Assume the unearned revenue was initially recorded as a liability. Which of the following statements is true?

The accountant for Noble Jewelry Repair Services forgot to make an adjusting entry for Depreciation Expense for the current year. Which of the following is an effect of this error?

On the first day of January, Patricia borrowed $2,000 on a one-year note payable bearing interest at 4% per year. The note specifies that principal and interest must be paid in full at the end of the one-year period. On June 30, the adjusted trial balance will show Interest Payable of:

The worksheet is NOT a journal, a ledger, or a financial statement.

The accountant of Isabella Consulting Company failed to make an adjusting entry to record $6,000 for unearned service revenues that were earned before the end of the fiscal year. Assume the company initially recorded a liability. Which of the following statements is true?

The accountant of Linda Legal Services failed to make an adjusting entry for supplies that had been used for the year. Assume the supplies were initially recorded as an asset. Which of the following statements is true?