Question 1

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 answer of The accountant of Isabella Consulting Company failed...

Question 2

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 $7,000 of depreciation expense, the total expenses will be understated. Depreciation expense is an expense that reduces the value of assets over time, and failing to record it will result in an overstatement of net income. Therefore, Option A is incorrect as revenue would actually be understated. Option B is incorrect for the same reason. Option C is incorrect as expenses would actually be understated.

Question 3

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 4

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

Accepted Answer

A worksheet is an internal document used by accountants to organize information and make adjustments, but it is not a part of the final financial statements.

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, but there is $400 of Unearned Revenue, which means that $400 of the balance has not yet been earned. Patricia has earned one-third of the remaining $800 (since one-third of the services have been rendered), which is $266.67. Therefore, the adjusted balance of Service Revenue is $20,000 + $266.67, which equals $20,266.67. Since this is a credit balance, the final answer is $20,400.

Question 6

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 answer of All of a company's accounts and their...

Question 7

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

The answer of The accountant for Noble Jewelry Repair Services...

Question 8

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 used by a company's accounting team as an internal tool to help prepare financial statements.

Question 9

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

The answer of On the first day of January, Patricia...

Question 10

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

Since the $6,000 of unearned revenue was initially recorded as a liability, failing to record the adjustment to recognize the revenue will result in understating total revenue. This is because revenue was earned but not recorded, so the revenues stated will be less than the actual amount earned.

Question 11

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

The answer of The accountant for Noble Jewelry Repair Services...

Question 12

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 reduces the carrying value of the asset and recognizes a portion of the asset's cost as an expense for the current period. As a result, it decreases the total assets and increases the total expenses.

Question 13

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 answer of The salaries are $6,000 per week of...

Question 14

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 answer of The accountant of Linda Legal Services failed...

Question 15

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

Accepted Answer

A worksheet is a document used to organize and summarize accounting information, but it is not a journal, ledger, or financial statement.

Question 16

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 17

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

- The starting balance of Unearned Revenue was $6,000 (Cr.).
- In January and February, a total of $3,000 + $1,000 = $4,000 (Cr.) was collected as advance fees, increasing the balance of Unearned Revenue to $10,000 (Cr.).
- During the two-month period, services were rendered worth $6,500, which decreases the balance of Unearned Revenue by $6,500 (Dr.).
- The balance in Unearned Revenue at the end of February can be calculated as: 
  $10,000 (Cr.) - $6,500 (Dr.) = $3,500 (Cr.)
Therefore, the correct answer is option D, a credit balance of $3,500.

Question 18

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

The answer of The accountant for Sparks Electric Company failed...

Question 19

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 should have been recorded as an expense in the current year, but since it was not recorded, the total expenses will be understated. This will result in an overstatement of net income for the current year.

Question 20

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 balances in an adjusted trial balance because it includes all necessary adjustments made at the end of a period to ensure accurate financial reporting. The general journal and chart of accounts contain transactional information and account titles, respectively, while the unadjusted trial balance does not reflect any necessary adjustments.

Quiz 3: The Adjusting Process

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

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

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

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?

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

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 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?

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

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?

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

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?

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?

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