Question 1

An adjusting journal entry contains a debit to an expense account and a credit to a contra account.This is an example of what type of adjusting entry?

Accepted Answer

This is an example of a depreciation expense adjusting entry, where the expense account is debited and the contra asset account, Accumulated Depreciation, is credited.

Question 2

The Accumulated Depreciation account:

Accepted Answer

The Accumulated Depreciation account is a contra asset account that is used to track the cumulative depreciation expense of a plant asset. It has a normal credit balance and is used to reduce the balance of the related asset account on the balance sheet. Option A is incorrect because depreciation expense is a separate account used to record the periodic allocation of the cost of a plant asset to expense. Option B is incorrect because the original cost of a plant asset is recorded in a separate account called Property, Plant, and Equipment or a similar account. Option D is incorrect because the normal balance of a contra asset account is the opposite of its companion account.

Question 3

A tired accountant failed to record the adjusting entry for accrued revenues.How does this error affect the balance sheet?

Accepted Answer

Accrued revenues are revenues that have been earned but not yet received or recorded. If the adjusting entry for accrued revenues is not recorded, the assets for the period will be understated because accrued revenues represent an asset. This means that the balance sheet will not accurately reflect the company's financial position, which can lead to incorrect financial analysis and decision-making.

Question 4

Which accounts are used in the adjusting entry to record salaries owed to employees,but not paid until the next accounting period?

Accepted Answer

Salaries Expense is credited to reduce the expense for the current period, while Salaries Payable is credited to record the amount owed to employees but not yet paid. This creates a liability on the balance sheet for the unpaid salaries.

Question 5

The book value of a plant asset is the:

Accepted Answer

Book value is calculated by subtracting the accumulated depreciation from the cost of the asset. Therefore, the correct answer is D, cost of the asset less the accumulated depreciation.

Question 6

Prepaid expenses will:

Accepted Answer

Prepaid expenses are initially recorded as assets and become expenses as the benefits are used up or expire over time.

Question 7

The adjustment for an accrued expense:

Accepted Answer

An adjustment for an accrued expense increases the expense account (reflecting the cost incurred) and increases the liability account (indicating the obligation to pay in the future).

Question 8

The Houston Mavericks basketball team receives $5,000 for season tickets on August 1.By December 31,they have earned $2,000 of the revenue.The adjusting entry to be made on December 31 by the Houston Mavericks includes a:

Accepted Answer

The adjusting entry to be made on December 31 by the Houston Mavericks includes a debit to Unearned Revenue of $2,000. This is because only $2,000 of the $5,000 received for season tickets has been earned as revenue by December 31. The remaining $3,000 is still unearned and should be recorded as a liability (Unearned Revenue) until the games are played and the revenue is earned. Therefore, the adjustment will reduce the Unearned Revenue balance by the amount earned so far ($2,000).

Question 9

Which account is credited in the adjusting entry to allocate the cost of equipment to an expense account?

Accepted Answer

Accumulated Depreciation is credited in the adjusting entry to allocate the cost of equipment to an expense account, as it is a contra asset account that reduces the book value of the equipment.

Question 10

At the end of the accounting period,a company has accrued interest revenue that they will not receive until the next accounting period.The adjusting entry would include a:

Accepted Answer

The adjusting entry would include a debit to Interest Receivable, as this account represents the amount of interest revenue earned but not yet received. Accrual accounting requires recording revenue when it is earned, not when it is received. Therefore, the interest revenue should be credited, and the corresponding debit should be made to the Interest Receivable account, which represents the interest revenue that the company will receive in the future.

Question 11

Adjusting entries:

Accepted Answer

Adjusting entries are made at the end of an accounting period before the financial statements are prepared. They help to update accounts and ensure that the financial statements reflect accurate and up-to-date information. Adjusting entries are not made on a daily basis for supplies used, as this would be recorded through regular expense entries. They are also not made to correct errors in previous journal entries, as this would require a separate correction entry.

Question 12

Adjusting entries:

Accepted Answer

Adjusting Unearned Revenue is necessary in order to properly recognize revenue that has been received but not yet earned. Closing revenue and expense accounts are part of the accounting cycle at the end of the period, but these do not involve adjusting entries. Adjusting Cash would only be necessary if there were discrepancies or errors in the recorded cash transactions.

Question 13

Which of the following is NOT a correct statement about adjusting entries?

Accepted Answer

Adjusting entries do not necessarily affect Cash. They usually involve non-cash items such as prepaid expenses, accrued revenues or expenses, and depreciation expenses.

Question 14

With an accrual of revenue:

Accepted Answer

Accrual of revenue means revenue is recognized when it is earned irrespective of whether cash is received or not. So, the cash is received after the revenue is recorded.

Question 15

________ is the allocation of the cost of an asset over the asset's useful life.

Accepted Answer

Depreciation is the method of allocating the cost of a long-term asset over its useful life. This is done in order to match the cost of the asset to the period during which it provides benefits to the company. Accrual refers to the recognition of revenue and expenses when they are earned or incurred, regardless of when payment is received or made. Deferral refers to the postponement of recognition of revenue or expenses until a later period. Expiration has no relation to the allocation of an asset's cost over its useful life.

Question 16

On December 31,2014,salaries owed to employees total $4,150.These will be paid on January 4,2015.An adjusted trial balance prepared on December 31,2014,includes which of the following?

Accepted Answer

Salaries owed to employees at year-end that will be paid in the following year are considered a liability and should be recorded as Salaries Payable. The adjusting entry would include Salaries Expense and Salaries Payable. Option B is incorrect because Unearned Salaries Revenue is a liability account used to record payments received in advance for work that has not yet been performed, which does not apply in this scenario. Option C is incorrect because Unearned Salaries is not a valid account for this scenario. Option D is incorrect because it includes both Salaries Payable and Unearned Salaries, neither of which accurately reflect the situation.

Question 17

________ will be increased when a company receives cash before performing the services.

Accepted Answer

Unearned Service Revenue represents a liability for the company because the services have not yet been provided. When the company receives cash before performing the services, the Unearned Service Revenue account is increased. It will be recognized as revenue once the services are provided.

Question 18

A journal entry contains a debit to a liability account and a credit to a revenue account.This is an example of a(n):

Accepted Answer

A debit to a liability account indicates that a liability is being created or increased, while a credit to a revenue account indicates that revenue is being earned. This is consistent with the receipt of unearned revenue, which is a liability until the goods or services are provided to the customer and the revenue can be recognized.

Question 19

Which of the following financial statement(s)is(are)prepared using the adjusted trial balance?

Accepted Answer

The adjusted trial balance is used to prepare the balance sheet, income statement, and statement of retained earnings.

Question 20

When an adjustment is made for prepaid rent:

Accepted Answer

When an adjustment is made for prepaid rent, it means that a portion of the prepaid rent is recognized as an expense for the period. This decreases the prepaid rent asset (since a part of it is now used) and increases the rent expense.

Quiz 3: Accrual Accounting Income

An adjusting journal entry contains a debit to an expense account and a credit to a contra account.This is an example of what type of adjusting entry?

The Accumulated Depreciation account:

A tired accountant failed to record the adjusting entry for accrued revenues.How does this error affect the balance sheet?

Which accounts are used in the adjusting entry to record salaries owed to employees,but not paid until the next accounting period?

The book value of a plant asset is the:

Prepaid expenses will:

The adjustment for an accrued expense:

The Houston Mavericks basketball team receives $5,000 for season tickets on August 1.By December 31,they have earned $2,000 of the revenue.The adjusting entry to be made on December 31 by the Houston Mavericks includes a:

Which account is credited in the adjusting entry to allocate the cost of equipment to an expense account?

At the end of the accounting period,a company has accrued interest revenue that they will not receive until the next accounting period.The adjusting entry would include a:

Adjusting entries:

Adjusting entries:

Which of the following is NOT a correct statement about adjusting entries?

With an accrual of revenue:

________ is the allocation of the cost of an asset over the asset's useful life.

On December 31,2014,salaries owed to employees total $4,150.These will be paid on January 4,2015.An adjusted trial balance prepared on December 31,2014,includes which of the following?

________ will be increased when a company receives cash before performing the services.

A journal entry contains a debit to a liability account and a credit to a revenue account.This is an example of a(n) :

Which of the following financial statement(s) is(are) prepared using the adjusted trial balance?

When an adjustment is made for prepaid rent: