Question 1

Windstar Corp.purchased supplies at a cost of $6,000 during the year.At December 31,supplies on hand are $1,400.Supplies expense for the year was $5,200.How much were supplies on hand at January 1?

Accepted Answer

The answer of Windstar Corp.purchased supplies at a cost of...

Question 2

Place Corp.purchased supplies at a cost of $12,000 during the year.At January 1,supplies on hand were $2,000.At December 31,supplies on hand are $1,000.Determine the amount of supplies expense for the year.

Accepted Answer

The supplies expense for the year is the cost of supplies purchased ($12,000) minus the supplies on hand at the end of the year ($1,000) plus the supplies on hand at the beginning of the year ($2,000). Therefore, supplies expense for the year is $12,000 - $1,000 + $2,000 = $13,000. Therefore, the correct answer is C.

Question 3

Vake purchased supplies at a cost of $18,000 during 2017.At January 1,2017,the beginning balance in the Supplies account was $1,000.For 2017,supplies expense was $16,000.How much "Supplies" are on hand as of December 31,2017?

Accepted Answer

The supplies on hand as of December 31, 2017 can be calculated using the following formula:

Beginning Supplies + Supplies Purchased - Supplies Expense = Ending Supplies

$1,000 + $18,000 - $16,000 = $3,000

Therefore, the answer is B) $3,000.

Question 4

Which one of the following is an example of an accrued liability?

Accepted Answer

An accrued liability refers to an expense that has been incurred by the company but not yet paid. In this case, wages have been earned by employees but have not been paid at the end of the period, thus making it an accrued liability. Options B, C, and D refer to prepayments or assets that will benefit several periods, therefore not meeting the definition of an accrued liability.

Question 5

Lincoln Corp.received advance payments from customers during 2017 of $10,000.At December 31,2017,$1,000 of the advance payments still had not been earned.After the adjustments are recorded and posted at December 31,2017,what are the balances in Unearned Service Revenue and Service Revenue?  
$\begin{array}{llcc}
  \text { Unearned Service Revenue } &  \text {Service Revenue  } \
\end{array}$

a.
$\begin{array}{cc}
&&&\$1,000&&&&&&&&&\$9,000
\end{array}$

b.
$\begin{array}{cc}
&&&\$1,000&&&&&&&&&\$10,000
\end{array}$

c.
$\begin{array}{cc}
&&&\$11,000&&&&&&&&\$1,000
\end{array}$

d.
$\begin{array}{cc}
&&&\$9,000&&&&&&&&\$10,000
\end{array}$

Accepted Answer

The answer of Lincoln Corp.received advance payments from customers during...

Question 6

Frank Corporation purchased supplies at a cost of $15,000 during 2017.At January 1,2017,supplies on hand were $2,000.At December 31,2017,supplies on hand are $2,500.Calculate supplies expense for 2017.

Accepted Answer

Supplies expense can be calculated using the following formula:

Supplies expense = Supplies purchased during the year - Supplies on hand at the end of the year + Supplies on hand at the beginning of the year

Substituting the given values, we get:

Supplies expense = $15,000 - $2,500 + $2,000 = $14,500

Therefore, the correct answer is B.

Question 7

Charlie Company had $1,800 of supplies on hand at January 1.During the year,supplies with a cost of $4,000 were purchased.At December 31,the actual supplies on hand amount to $1,300.After the adjustments are recorded and posted at December 31,determine the balances in the Supplies and Supplies Expense accounts.  
$\begin{array}{llcc}
&&  \text { Supplies } &  \text { Supplies Expense } \
\end{array}$

a.
$\begin{array}{cc}
&&&\$1,800&&&\$4,000
\end{array}$

b.
$\begin{array}{cc}
&&&\$1,300&&&\$4,500
\end{array}$

c.
$\begin{array}{cc}
&&&\$5,300&&&\$5,800
\end{array}$

d.
$\begin{array}{cc} 
&&&\$1,300&&&\$5,800
\end{array}$

Accepted Answer

First, we need to calculate the total supplies available for use during the year. This can be calculated as follows:

Supplies available for use = Beginning supplies + Purchases - Ending supplies
= $1,800 + $4,000 - $1,300
= $4,500

Next, we need to record the adjustment for supplies used during the year. This can be calculated as follows:

Supplies used during the year = Supplies available for use - Supplies on hand at December 31
= $4,500 - $1,300
= $3,200

Finally, we can calculate the balances in the Supplies and Supplies Expense accounts after the adjustments as follows:

Supplies balance = Beginning supplies + Purchases - Supplies used during the year
= $1,800 + $4,000 - $3,200
= $2,600

Supplies Expense balance = Supplies used during the year
= $3,200

Therefore, the answer is B as it matches the calculated balances.

Question 8

Stockton Co.received advance payments from customers during 2017 of $6,000.At December 31,2016,$1,300 of the advance payments still had not been earned.After the adjustments are recorded and posted at December 31,2016,what will the balances be in the Unearned Book Revenue and Book Revenue accounts? $\begin{array}{llcc}
  \text { Unearned Book Revenue } &  \text {Book Revenue  } \
\end{array}$

a.
$\begin{array}{cc}
&&&\$1,300&&&&&&&&\$6,000
\end{array}$

b.
$\begin{array}{cc}
&&&\$1,300&&&&&&&&\$4,700
\end{array}$

c.
$\begin{array}{cc}
&&&\$6,000&&&&&&&&\$1,300
\end{array}$

d.
 None of these choices

Accepted Answer

The $1,300 of advance payments that still had not been earned at December 31, 2016, must be deferred to the Unearned Book Revenue account. Therefore, the balance in the Unearned Book Revenue account will be $1,300.

To determine the balance in the Book Revenue account, we need to subtract the portion of the advance payments that have been earned as of December 31, 2016. If no other information is given, we cannot determine this amount. Therefore, the best choice is B, which shows the balance in the Unearned Book Revenue account but does not specify the balance in the Book Revenue account.

Question 9

What happens to the accounting equation when the adjustment for depreciation expense for the accounting period is recorded?

Accepted Answer

When the adjustment for depreciation expense is recorded, it reduces the value of the asset (through accumulated depreciation), which decreases the total assets. At the same time, the decrease in net income (due to recording depreciation expense) reduces retained earnings which in turn decreases stockholders' equity. Thus, both assets and stockholders' equity decrease.

Question 10

On December 1,2017,Vonn Corporation paid $8,000 rent in advance.The rent per month is $1,000.If Vonn's accounting period ends on December 31,2017,what will be reported on the financial statements?

Accepted Answer

Since Vonn Corporation paid $8,000 for rent in advance covering 8 months, only $1,000 (one month's rent for December) would be recognized as an expense in December 2017. The remaining $7,000 is a prepaid expense, representing the rent for January through July of the following year, and would be reported as Prepaid Rent on the balance sheet at December 31, 2017.

Question 11

What happens to the accounting equation when the adjustment that recognizes accrued interest revenue is recorded?

Accepted Answer

When the adjustment that recognizes accrued interest revenue is recorded, there is an increase in assets (in the form of interest receivable) and an increase in stockholders' equity (in the form of interest revenue). This is reflected in the accounting equation, as assets and stockholders' equity both increase by the same amount.

Question 12

A company forgot to record four adjustments during 2017.Which one of the following omissions of adjustments will understate net income?

Accepted Answer

When sales made during the last week of the period are not recorded, revenue is understated, leading to an understatement of net income.

Question 13

Which one of the following adjustments will increase assets?

Accepted Answer

Recording rent revenue for amounts owed by a tenant but not yet paid increases assets by recognizing accounts receivable.

Question 14

Lucky Company purchased a truck at a cost of $12,000 in 2012.As of January 1,2017,depreciation of $10,000 had been recorded on this asset.Depreciation expense for 2017 is $2,000.After the adjustments are recorded and posted at December 31,2017,what is the carrying value of the truck?

Accepted Answer

The answer of Lucky Company purchased a truck at a...

Question 15

Cuisine Company received a 6-month,6% note for $10,000 from its president on October 1,2016.The note is due on March 31,2017.If Cuisine's accounting period ends on December 31,how much interest revenue should Cuisine recognize during 2016 and 2017?  
$\begin{array}{cc}
&&&\underline { 2016 }&& \underline { 2017 } \
\end{array}$

a.
$\begin{array}{cc}
&&&\$450&&\$150
\end{array}$

b.
$\begin{array}{cc}
&&&\$600&&\$0
\end{array}$

c.
$\begin{array}{cc}
&&&\$300&&\$300
\end{array}$

d.
$\begin{array}{cc} 
&&&\$150&&\$150
\end{array}$

Accepted Answer

The answer of Cuisine Company received a 6-month,6% note for...

Question 16

Vivo Co.received an 8-month,9% note for $100,000 from its agent on October 1,2016.The note is due on May 30,2017.If Vivo accounting period ends on December 31,2016,how much interest revenue should Vivo recognize during 2016 and 2017?  
$\begin{array}{cc}
&&&\underline { 2016 }&&& \underline { 2017 } \
\end{array}$

a.
$\begin{array}{cc}
&&&\$3,750&&\$2,250
\end{array}$

b.
$\begin{array}{cc}
&&&\$2,250&&\$3,750
\end{array}$

c.
$\begin{array}{cc}
&&&\$9,000&&&\$0
\end{array}$

d.
$\begin{array}{cc} 
&&&\$3,375&&\$5,625
\end{array}$

Accepted Answer

Vivo should recognize interest revenue for 3 months in 2016 and 5 months in 2017.
For 2016:
Interest revenue = Principal x Rate x Time
= $100,000 x 9% x 3/12
= $2,250
For 2017:
Interest revenue = Principal x Rate x Time
= $100,000 x 9% x 5/12
= $3,750
Therefore, the total interest revenue that Vivo should recognize during 2016 and 2017 is $2,250 + $3,750 = $6,000. Option B is the best choice as it reflects this calculation.

Question 17

A company forgot to record four adjustments during 2017.Which one of the following omissions of adjustments will overstate assets?

Accepted Answer

Prepaid insurance that is not reduced for the portion of the policy that has expired during the period will overstate assets because it is including the value of insurance that has already been used up. The other options will either have no effect on assets (such as interest on monies borrowed), or will understate assets (such as ignoring income taxes owed but not yet paid).

Question 18

Gear Shop purchased supplies at a cost of $1,000 during the year.At January 1,the beginning balance in the Supplies account was $300.At December 31,supplies on hand are $100.Determine supplies expense for the year.

Accepted Answer

Supplies expense for the year can be calculated as follows:

Beginning balance in Supplies account + Supplies purchased during the year - Ending balance in Supplies account = Supplies expense for the year

$300 + $1,000 - $100 = $1,200

Therefore, the supplies expense for the year was $1,200, which corresponds to option B.

Question 19

Adjustments are necessary only if

Accepted Answer

Adjustments are necessary if cash receipts and payments occur before or after the point in time when revenues and expenses should be recognized under the accrual basis of accounting. Adjustments are made to ensure that financial statements accurately reflect the company's financial performance and position. Other choices are not true statements about the necessity of adjustments.

Question 20

Starlight Associates,Inc.recorded salary expense of $100,000 in 2017.However,additional salaries of $5,000 had been earned,but not paid or recorded at December 31,2017.After the adjustments are recorded and posted at December 31,2017,what are the balances in the Salaries Expense and Salaries Payable accounts?  
$\begin{array}{llcc}
&&  \text { Salaries Expense} &  \text { Salaries Payable } \
\end{array}$

a.
$\begin{array}{cc}
&&&\$105,000&&&&&\$5,000
\end{array}$

b.
$\begin{array}{cc}
&&&\$100,000&&&&&&\$0
\end{array}$

c.
$\begin{array}{cc}
&&&\$100,000&&&&&\$5,000
\end{array}$

d.
$\begin{array}{cc} 
&&&\$105,000&&&&&&\$0
\end{array}$

Accepted Answer

The answer of Starlight Associates,Inc.recorded salary expense of $100,000 in...

Quiz 4: Income Measurement and Accrual Accounting