Question 1

Supplies are recorded as assets when purchased.Therefore,the credit to Supplies in the adjusting entry is for the amount of supplies
A)still on hand
B)purchased
C)used
D)required for the next accounting period

Accepted Answer

The credit to Supplies in the adjusting entry reflects the amount of supplies used during the period, as the entry adjusts the Supplies account to represent the current amount of supplies on hand by recognizing the expense of the supplies that have been consumed.

Question 2

As time passes,fixed assets other than land lose their capacity to provide useful services.To account for this decrease in usefulness,the cost of fixed assets is systematically allocated to expense through a process called
A)equipment allocation
B)depreciation
C)accumulation
D)matching

Accepted Answer

The process described in the question is depreciation, which is the systematic allocation of the cost of a fixed asset over its useful life. Option A (equipment allocation) is not a commonly used term in accounting, Option C (accumulation) does not accurately represent the process of allocating the cost of fixed assets, and Option D (matching) is used to match expenses with revenues, not to allocate the cost of fixed assets over their useful lives.

Question 3

The type of account and normal balance of Unearned Consulting Fees is
A)revenue,credit
B)expense,debit
C)liability,credit
D)liability,debit

Accepted Answer

Unearned Consulting Fees represent money that has been received by a company for services not yet rendered. As such, it is a liability account, indicating an obligation to provide the services in the future. The normal balance of a liability account is credit, meaning that a credit entry increases the balance of the account while a debit entry decreases it. Therefore, the correct answer is C - liability, credit.

Question 4

Data for an adjusting entry described as "accrued wages,$2,020" requires a
A)debit to Wages Expense and a credit to Wages Payable
B)debit to Wages Payable and a credit to Wages Expense
C)debit to Accounts Receivable and a credit to Wages Expense
D)debit to Dividends and a credit to Wages Payable

Accepted Answer

Accrued wages means that employees have earned wages, but they have not been paid yet. Therefore, a debit should be made to an expense account (Wages Expense) to recognize the wages earned by the employees. At the same time, a credit should be made to a liability account (Wages Payable) to indicate the amount owed to employees for the unpaid wages.

Question 5

The cost of office supplies to be used in future periods is ordinarily shown on the balance sheet as an
A)stockholders' equity
B)asset
C)contra asset
D)liability

Accepted Answer

The cost of office supplies to be used in future periods is an asset because it is a future economic benefit that the company owns/control due to past events (purchase of office supplies). As the supplies are used in future periods, they will be expensed and reduce the asset balance.

Question 6

Accrued revenues would appear on the balance sheet as
A)assets
B)liabilities
C)stockholders' equity
D)prepaid expenses

Accepted Answer

Accrued revenues represent amounts earned but not yet received, meaning the company has a right to receive payment from its customers. As such, accrued revenues would be recorded as assets on the balance sheet.

Question 7

Smokey Company purchases a one-year insurance policy on July 1 for $3,600.The adjusting entry on December 31 is
A)debit Insurance Expense,$1,800; credit Prepaid Insurance,$1,800
B)debit Insurance Expense,$1,500; credit Prepaid Insurance,$1,500
C)debit Insurance Expense,$2,100; credit Prepaid Insurance,$2,100
D)debit Prepaid Insurance,$1,800; credit Cash,$1,800

Accepted Answer

Since the insurance policy is for one year and was purchased on July 1, half of the policy period has already passed by the end of the year on December 31. Therefore, the amount of prepaid insurance that has been used up (or expired) during the period is $1,800 ($3,600/2). This means that the adjusting entry on December 31 should debit Insurance Expense for $1,800 (to recognize the expense for the period) and credit Prepaid Insurance for $1,800 (to reduce the asset to its remaining balance of $1,800). Option A correctly reflects this entry. Option B is incorrect because it only recognizes $1,500 of the insurance expense that should be recognized for the period. Option C overstates the expense and understates the asset. Option D reverses the original entry made on July 1 and does not reflect the adjusting entry required on December 31.

Question 8

The entry to adjust for the cost of supplies used during the accounting period is
A)debit Supplies Expense; credit Supplies
B)debit Stockholders' Equity; credit Supplies
C)debit Accounts Payable; credit Supplies
D)debit Supplies; credit Stockholders' Equity

Accepted Answer

Supplies Expense represents the expense of using supplies during the accounting period. Supplies, on the other hand, represents the cost of the supplies on hand at the beginning or end of the period. Therefore, to adjust for the cost of supplies used during the period, we need to debit Supplies Expense and credit Supplies.

Question 9

The balance in the prepaid rent account before adjustment at the end of the year is $32,000,which represents four months' rent paid on December 1.The adjusting entry required on December 31 is
A)debit Rent Expense,$8,000; credit Prepaid Rent,$8,000
B)debit Prepaid Rent,$24,000; credit Rent Expense,$8,000
C)debit Rent Expense,$24,000; credit Prepaid Rent,$8,000
D)debit Prepaid Rent,$8,000; credit Rent Expense,$8,000

Accepted Answer

Since the $32,000 covers four months and only one month has passed by December 31, $8,000 (1/4 of $32,000) of the prepaid rent has been used. The adjusting entry should recognize this expense by debiting Rent Expense and crediting Prepaid Rent for $8,000.

Question 10

The type of account and normal balance of Prepaid Insurance is
A)asset,credit
B)asset,debit
C)contra asset,credit
D)contra asset,debit

Accepted Answer

Prepaid insurance is an asset because it represents something of value that the company owns (i.e. the insurance coverage). As it is something that the company has paid for in advance, the normal balance for prepaid insurance is a debit.

Question 11

Which of the following is an example of a prepaid expense?
A)Supplies
B)Accounts Receivable
C)Unearned Subscriptions
D)Unearned Fees

Accepted Answer

The answer of Which of the following is an example...

Question 12

The balance in the office supplies account on January 1 was $7,000,supplies purchased during January were $3,000,and the supplies on hand at January 30 were $2,000.The amount to be used for the appropriate adjusting entry is
A)$4,300
B)$12,000
C)$5,000
D)$8,000

Accepted Answer

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

Question 13

Buster Industries pays weekly salaries of $30,000 on Friday for a five-day week ending on that day.The adjusting entry necessary at the end of the fiscal period ending on Tuesday is
A)debit Salaries Payable,$12,000; credit Cash,$12,000
B)debit Salary Expense,$12,000; credit Dividends,$12,000
C)debit Salary Expense,$12,000; credit Salaries Payable,$12,000
D)debit Dividends,$12,000; credit Cash,$12,000

Accepted Answer

Since the fiscal period ends on Tuesday and the weekly salaries are paid on Friday, the adjusting entry is necessary to recognize the portion of the weekly salaries that pertains to the period after Tuesday. To do this, we need to credit Salaries Payable, an accrued liability account, and debit Salary Expense, an income statement account. The amount for this adjusting entry is one-third of the weekly salaries, or $12,000 ($30,000 divided by 5 days multiplied by 2 days). Therefore, the correct option is C.

Question 14

The entry to adjust the accounts for salaries accrued at the end of the accounting period is
A)debit Salaries Payable; credit Cash
B)debit Cash; credit Salaries Payable
C)debit Salaries Payable; credit Salaries Expense
D)debit Salaries Expense; credit Salaries Payable

Accepted Answer

Salaries accrued but not yet paid at the end of the accounting period represent an expense that the company owes to its employees. Therefore, the appropriate entry to reflect this is to debit Salaries Expense and credit Salaries Payable. Option A is incorrect because it debits Salaries Payable and credits Cash, which would not reflect the accrual of salaries. Option B is also incorrect because it credits Salaries Payable and debits Cash, which would reflect the payment of salaries instead of the accrual. Option C is incorrect because it credits Salaries Expense, which would decrease the expense account instead of increasing it to reflect the accrual.

Question 15

Gracie,Inc.made a prepaid rent payment of $2,800 on January 1.The company's monthly rent is $700.The amount of prepaid rent that would appear on the January 31 balance sheet after adjustment is
A)$2,100
B)$700
C)$2,800
D)$1,400

Accepted Answer

Amount of prepaid rent that would appear on the January 31 balance sheet after adjustment = Prepaid rent payment on January 1 - Rent for January = $2,800 - $700 = $2,100

Question 16

The difference between the balance of a fixed asset account and the related accumulated depreciation account is termed
A)historical cost
B)contra asset
C)book value
D)market value

Accepted Answer

The difference between the balance of a fixed asset account and the related accumulated depreciation account is termed book value. The historical cost represents the original cost of the asset, the contra asset represents an asset account with a credit balance that is used to offset the balance in a related asset account, and market value represents the current value of the asset.

Question 17

Accumulated Depreciation and Depreciation Expense are classified,respectively,as
A)expense,contra asset
B)asset,contra liability
C)revenue,asset
D)contra asset,expense

Accepted Answer

Accumulated Depreciation is a contra asset account because it represents the amount of a fixed asset's cost that has been allocated to expense through depreciation. On the other hand, Depreciation Expense is an expense account because it represents the cost of using a fixed asset over its useful life. Therefore, the best choice is D, Contra asset and Expense.

Question 18

Which of the following is the proper adjusting entry,based on a prepaid insurance account balance before adjustment of $14,000 and unexpired insurance of $3,000,for the fiscal year ending on April 30?
A)debit Insurance Expense,$3,000; credit Prepaid Insurance,$3,000
B)debit Insurance Expense,$14,000; credit Prepaid Insurance,$14,000
C)debit Prepaid Insurance,$11,000; credit Insurance Expense,$11,000
D)debit Insurance Expense,$11,000; credit Prepaid Insurance,$11,000

Accepted Answer

The adjusting entry for prepaid insurance is to debit Insurance Expense for the amount of insurance that has been used (expired) during the accounting period and credit Prepaid Insurance for the remaining balance. In this case, the unexpired insurance is $3,000, which means that $11,000 (=$14,000 - $3,000) has been used up during the year. Therefore, the proper adjusting entry is to debit Insurance Expense for $11,000 and credit Prepaid Insurance for $11,000. Option D matches this description.

Question 19

The adjusting entry to record the depreciation of a building for the fiscal period is
A)debit Depreciation Expense; credit Building.
B)debit Depreciation Expense; credit Accumulated Depreciation.
C)debit Accumulated Depreciation; credit Depreciation Expense.
D)debit Building; credit Depreciation Expense.

Accepted Answer

According to the matching principle, the cost of the building should be recognized as an expense over its useful life. Therefore, the adjusting entry to record the depreciation of a building is to debit Depreciation Expense and credit Accumulated Depreciation. By doing so, the carrying value of the building (original cost - accumulated depreciation) is reduced on the balance sheet, reflecting the decrease in its value over time. Choice A is incorrect because it would increase the carrying value of the building instead of reducing it. Choice C is incorrect because it reverses the normal debit/credit relationship of these accounts. Choice D is incorrect because it would incorrectly record an increase in the cost of the building rather than the recognition of its decrease in value.

Question 20

The supplies account has a balance of $4,400 at the beginning of the year and was debited during the year for $2,400,representing the total of supplies purchased during the year.If $400 of supplies are on hand at the end of the year,the supplies expense to be reported on the income statement for the year is
A)$400
B)$2,000
C)$6,800
D)$6,400

Accepted Answer

The supplies expense is calculated as the beginning balance plus purchases minus the ending balance: $4,400 + $2,400 - $400 = $6,400.

Quiz 3: The Adjusting Process

Supplies are recorded as assets when purchased.Therefore,the credit to Supplies in the adjusting entry is for the amount of supplies

As time passes,fixed assets other than land lose their capacity to provide useful services.To account for this decrease in usefulness,the cost of fixed assets is systematically allocated to expense through a process called

The type of account and normal balance of Unearned Consulting Fees is

Data for an adjusting entry described as "accrued wages,$2,020" requires a

The cost of office supplies to be used in future periods is ordinarily shown on the balance sheet as an

Accrued revenues would appear on the balance sheet as

Smokey Company purchases a one-year insurance policy on July 1 for $3,600.The adjusting entry on December 31 is

The entry to adjust for the cost of supplies used during the accounting period is

The balance in the prepaid rent account before adjustment at the end of the year is $32,000,which represents four months' rent paid on December 1.The adjusting entry required on December 31 is

The type of account and normal balance of Prepaid Insurance is

Which of the following is an example of a prepaid expense?

The balance in the office supplies account on January 1 was $7,000,supplies purchased during January were $3,000,and the supplies on hand at January 30 were $2,000.The amount to be used for the appropriate adjusting entry is

Buster Industries pays weekly salaries of $30,000 on Friday for a five-day week ending on that day.The adjusting entry necessary at the end of the fiscal period ending on Tuesday is

The entry to adjust the accounts for salaries accrued at the end of the accounting period is

Gracie,Inc.made a prepaid rent payment of $2,800 on January 1.The company's monthly rent is $700.The amount of prepaid rent that would appear on the January 31 balance sheet after adjustment is

The difference between the balance of a fixed asset account and the related accumulated depreciation account is termed

Accumulated Depreciation and Depreciation Expense are classified,respectively,as

Which of the following is the proper adjusting entry,based on a prepaid insurance account balance before adjustment of $14,000 and unexpired insurance of $3,000,for the fiscal year ending on April 30?

The adjusting entry to record the depreciation of a building for the fiscal period is