Question 1

At Sea,a cruise industry magazine,collected $480,000 in subscription revenue in May.Each subscriber will receive an issue of the magazine for each of the next 12 months,beginning with the June issue.The company uses the accrual basis of accounting.Provide the adjusting entry needed on June 30.(Ignore explanation).Assume the magazine initially records a liability for the subscription revenue.

Accepted Answer

The answer of At Sea,a cruise industry magazine,collected $480,000 in...

Question 2

Kittery Services,Inc.purchased computers that are to be used in its consultancy services.Based on the matching principle,the related account that should appear on the income statement for the year ended December 31,2016 is ________.
A)Depreciation Expense
B)Service Revenue
C)Accumulated Depreciation
D)Equipment Expense

Accepted Answer

The matching principle requires that expenses be matched with the revenues they helped generate in the same accounting period. Since the computers are assets that will be used to generate revenue over multiple periods, they need to be depreciated over their useful lives, and the Depreciation Expense account should be used to allocate a portion of the cost of the computers as an expense in the income statement for each period.

Question 3

A contra account's normal balance (debit or credit)is the opposite of the normal balance of the related account.

Accepted Answer

This statement is true. For example, if the related account has a normal credit balance, the contra account will have a normal debit balance.

Question 4

Explore,a travel magazine,collected $500,000 in subscription revenue in May.Each subscriber will receive an issue of the magazine for each of the next 12 months,beginning with the June issue.The company uses the accrual method of accounting.Provide the journal entry for collection of cash in May.(Ignore explanation).Assume the magazine initially records a liability for the subscription revenue.

Accepted Answer

The answer of Explore,a travel magazine,collected $500,000 in subscription revenue...

Question 5

On December 31,2016,the balance in Pinnacle Exploration Company's Unearned Revenue account was a credit of $6,000.In January,2017,the company received an advance payment of $12,000 from a new customer for services to be performed.By January 31,adjustments were made to recognize $7,000 of the revenue that had been earned during January.What was the balance in Unearned Revenue on January 31,2017?
A)$7,000 credit
B)$12,000 debit
C)$6,000 credit
D)$11,000 credit

Accepted Answer

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Question 6

The asset account,Office Supplies had a beginning balance of $5,300.During the accounting period,office supplies were purchased,on account,for $4,900.A physical count,on the last day of the accounting period,shows $2,300 of office supplies on hand.What is the amount of Supplies Expense for the accounting period?
A)$4,900
B)$2,700
C)$7,900
D)$3,000

Accepted Answer

Office Supplies:
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Question 7

The following Office Supplies account information is available for Able,Inc. $$\begin{array} { | l | r | } 
\hline \text { Beginning balance } & \$ 1,800 \
\hline \text { Office Supplies expensed } & 5,000 \
\hline \text { Ending balance } & 2,000 \
\hline
\end{array}$$ From the above information,calculate the amount of office supplies purchased.
A)$5,200
B)$5,000
C)$1,800
D)$2,000

Accepted Answer

Office Supplies purchased = Beginning balance + Office Supplies expensed - Ending balance= $1,800 + $5,000 - $2,000= $5,200

Question 8

Holland,Inc.purchased manufacturing equipment for $12,600.It has an estimated useful life of seven years and no residual value.The company should record depreciation expense of $100 per month.(Assume that the company uses the straight-line method. )

Accepted Answer

Depreciation Expense per month = ($12,600 / 7)/ 12 = $150

Question 9

In the case of a deferred expense,the adjusting entry required at the end of a period will consist of a debit to the Prepaid Expense account.Assume the deferred expense was initially recorded as an asset.

Accepted Answer

The adjusting entry for a deferred expense typically involves a debit to an expense account (reflecting the expense now incurred) and a credit to the Prepaid Expense account (reducing the asset as it is used up).

Question 10

Prepaid Insurance is an asset account that appears on the balance sheet.

Accepted Answer

Prepaid Insurance meets the definition of an asset as it represents a future economic benefit (i.e., insurance coverage) that has already been paid for. As a result, it is recorded on the balance sheet as an asset.

Question 11

On January 1,2016,Prepaid Insurance of Maywood,Inc.had a beginning balance of $1,400.Three months of insurance premiums remain in the beginning balance.On February 1,2016,the company paid an annual insurance premium in the amount of $3,700 for the period beginning April 1.On February 28,2016,the balance in Prepaid Insurance is $934.The deferred expense was initially recorded as an asset.

Accepted Answer

Insurance premium per month = $1,400 / 3 = $467
Balance in Prepaid Insurance as of
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Question 12

The sum of all the depreciation expenses recorded to date for a depreciable asset is called residual value.

Accepted Answer

The sum of all the depreciation expenses recorded to date for a depreciable asset is called accumulated depreciation, not residual value. Residual value is the estimated value of the asset at the end of its useful life.

Question 13

A company received $5,000 for 100 one-year subscriptions on July 1.The journal entry to record this cash receipt would include a ________.The company uses a liability account for revenue received in advance.
A)credit to Accounts Payable for $5,000
B)debit to Prepaid Expenses for $5,000
C)credit to Unearned Revenue for $5,000
D)debit to Note Payable for $5,000

Accepted Answer

The company received revenue in advance, which means the cash received is not yet considered earned. Therefore, the journal entry must include a credit to Unearned Revenue, which is a liability account used to record revenue received in advance.

Question 14

On January 1,Ogden,Inc.had $1,500 of supplies on hand.During January,Ogden purchased $5,500 worth of new supplies.At the end of the month,a count revealed $700 worth of supplies remaining on the shelves.The adjusting entry needed will include a debit to Supplies Expense of $6,300.The supplies were initially recorded as an asset.

Accepted Answer

Supplies Expense = $1,500 + $5,500 - $700 = $6,300

Question 15

Harvard Financial Services,Inc.purchased computers that are to be used in its consultancy services.Based on the matching principle,what account,other than Computers,should appear on the balance sheet as of December 31,2016?
A)Depreciation Expense
B)Service Revenue
C)Accumulated Depreciation
D)Equipment Expense

Accepted Answer

According to the matching principle, when a company purchases an asset, such as the computers in this scenario, it is expected to use it over a period of time. Therefore, a portion of the cost of the asset is allocated as an expense each year through depreciation. This expense is recorded in the Depreciation Expense account. However, since the company is not disposing of the computers, the total cost of the asset will continue to appear on the balance sheet. To reflect the allocation of the cost as an expense and the total cost of the asset still remaining, the Accumulated Depreciation account is created. Therefore, the correct answer is C - Accumulated Depreciation.

Question 16

Prepaid Rent is an expense account that appears on the income statement.

Accepted Answer

Prepaid Rent is a current asset account that appears on the balance sheet. It represents rent paid in advance and has not yet been used. It does not appear on the income statement as an expense until the period in which the rent is actually used.

Question 17

Contra asset accounts,such as Accumulated Depreciation,always have normal debit balances.

Accepted Answer

Contra asset accounts, such as Accumulated Depreciation, have normal credit balances because they reduce the value of the asset account they are associated with.

Question 18

The depreciation method that allocates an equal amount of depreciation each year is called the straight-line method.

Accepted Answer

This statement is true. The straight-line method of depreciation allocates an equal amount of depreciation each year.

Question 19

In the case of a deferred expense,the adjusting entry required at the end of a period will consist of a credit to the Prepaid Expense account.Assume the deferred expense was initially recorded as an asset.

Accepted Answer

A deferred expense is initially recorded as an asset and requires an adjusting entry to reduce the asset and increase the expense account. This is done by crediting the Prepaid Expense account and debiting an appropriate expense account.

Question 20

Unearned Revenue is a(n)________ account and carries a normal ________ balance.
A)liability; credit
B)asset; credit
C)revenue; debit
D)asset; debit

Accepted Answer

Unearned Revenue is a liability account because a company receives payment in advance for services or goods they have not yet provided. It carries a normal credit balance because it represents a debt to the customer until the company fulfills their obligation.

Quiz 3: The Adjusting Process

Kittery Services,Inc.purchased computers that are to be used in its consultancy services.Based on the matching principle,the related account that should appear on the income statement for the year ended December 31,2016 is ________.

A contra account's normal balance (debit or credit)is the opposite of the normal balance of the related account.

Holland,Inc.purchased manufacturing equipment for $12,600.It has an estimated useful life of seven years and no residual value.The company should record depreciation expense of $100 per month.(Assume that the company uses the straight-line method. )

In the case of a deferred expense,the adjusting entry required at the end of a period will consist of a debit to the Prepaid Expense account.Assume the deferred expense was initially recorded as an asset.

Prepaid Insurance is an asset account that appears on the balance sheet.

The sum of all the depreciation expenses recorded to date for a depreciable asset is called residual value.

A company received $5,000 for 100 one-year subscriptions on July 1.The journal entry to record this cash receipt would include a ________.The company uses a liability account for revenue received in advance.

Harvard Financial Services,Inc.purchased computers that are to be used in its consultancy services.Based on the matching principle,what account,other than Computers,should appear on the balance sheet as of December 31,2016?

Prepaid Rent is an expense account that appears on the income statement.

Contra asset accounts,such as Accumulated Depreciation,always have normal debit balances.

The depreciation method that allocates an equal amount of depreciation each year is called the straight-line method.

In the case of a deferred expense,the adjusting entry required at the end of a period will consist of a credit to the Prepaid Expense account.Assume the deferred expense was initially recorded as an asset.

Unearned Revenue is a(n) account and carries a normal balance.

Quiz 3: The Adjusting Process

Kittery Services,Inc.purchased computers that are to be used in its consultancy services.Based on the matching principle,the related account that should appear on the income statement for the year ended December 31,2016 is ________.

A contra account's normal balance (debit or credit)is the opposite of the normal balance of the related account.

Holland,Inc.purchased manufacturing equipment for $12,600.It has an estimated useful life of seven years and no residual value.The company should record depreciation expense of $100 per month.(Assume that the company uses the straight-line method. )

In the case of a deferred expense,the adjusting entry required at the end of a period will consist of a debit to the Prepaid Expense account.Assume the deferred expense was initially recorded as an asset.

Prepaid Insurance is an asset account that appears on the balance sheet.

The sum of all the depreciation expenses recorded to date for a depreciable asset is called residual value.

A company received $5,000 for 100 one-year subscriptions on July 1.The journal entry to record this cash receipt would include a ________.The company uses a liability account for revenue received in advance.

Harvard Financial Services,Inc.purchased computers that are to be used in its consultancy services.Based on the matching principle,what account,other than Computers,should appear on the balance sheet as of December 31,2016?

Prepaid Rent is an expense account that appears on the income statement.

Contra asset accounts,such as Accumulated Depreciation,always have normal debit balances.

The depreciation method that allocates an equal amount of depreciation each year is called the straight-line method.

In the case of a deferred expense,the adjusting entry required at the end of a period will consist of a credit to the Prepaid Expense account.Assume the deferred expense was initially recorded as an asset.

Unearned Revenue is a(n) ________ account and carries a normal ________ balance.

Unearned Revenue is a(n) account and carries a normal balance.