Question 1

The supplies account had 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 answer of The supplies account had a balance of...

Question 2

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 proper adjusting entry for prepaid insurance with a balance before adjustment of $14,000 and unexpired insurance of $3,000 for the year ending on April 30 is to debit Insurance Expense for $11,000 (the difference between $14,000 and $3,000) and credit Prepaid Insurance for $11,000. This entry recognizes the portion of the prepaid insurance that has expired during the year ($3,000) and reduces the remaining balance of the prepaid insurance account to $11,000.

Question 3

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

The adjusting entry on December 31 will reduce the Prepaid Insurance account by half of its initial balance, which is $1,800 ($3,600/2). This means that we need to debit Insurance Expense for $1,800 to recognize the amount of insurance that was used up during the second half of the year, and credit Prepaid Insurance for $1,800 to show that we now have a remaining balance of only $1,800 in this account. Therefore, the correct answer is A.

Question 4

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

The adjusting entry for salaries accrued at the end of the accounting period involves debiting Salaries Expense (to recognize the expense for the period) and crediting Salaries Payable (to recognize the liability to pay the employees in the future). Therefore, the correct entry is to debit Salaries Expense and credit Salaries Payable, which is option D.

Question 5

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 the book value, which represents the net value of the asset that is reported on the balance sheet. The historical cost represents the original cost of the asset, the contra asset account is used to reduce the value of the asset (e.g. accumulated depreciation), and the market value represents the current value of the asset if sold in the market.

Question 6

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

Accepted Answer

Prepaid expenses are costs that have been paid but not yet consumed. Supplies fit this category because they are purchased in advance and used over time.

Question 7

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

Depreciation is the systematic allocation of the cost of fixed assets over their useful lives in order to reflect the decrease in usefulness of these assets over time. This process is necessary in order to accurately match expenses with revenues in the appropriate accounting period.

Question 8

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 31 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

Amount to be used for the appropriate adjusting entry = Balance in the office supplies account on January 1 + Supplies purchased during January - Supplies on hand at January 31 = $7,000 + $3,000 - $2,000 = $8,000

Question 9

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 is a liability account because it represents money paid by clients in advance for consulting services that have not yet been provided. The normal balance for liability accounts is credit.

Question 10

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 company has accrued three days of salaries that have not yet been paid. Therefore, an adjusting entry is needed to recognize the expense and liability for the accrued salaries. The entry should debit Salary Expense for $12,000 (3/5 of the weekly salaries) and credit Salaries Payable for $12,000. This will increase the expense and liability accounts, reflecting the company's obligation to pay its employees for the three days worked but not yet paid. Option A is incorrect because it only records the payment made on Friday and does not reflect the accrual of salaries for the three days. Option B is incorrect because there is no logical connection between Salary Expense and Dividends. Option D is incorrect because it records a payment of Dividends, which is not relevant to the question.

Question 11

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

When supplies are used during the accounting period, their cost needs to be recognized as an expense. Therefore, Supplies Expense (an expense account) needs to be debited. On the other hand, the value of supplies used decreases the balance of the Supplies (an asset account) account, so it needs to be credited.

Question 12

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

Accepted Answer

The cost of office supplies represents an asset on the balance sheet as they are considered resources owned by the company that can provide future economic benefits.

Question 13

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

Gracie, Inc. paid $2,800 for rent in advance on January 1, covering 4 months of rent at $700 per month. By January 31, one month's rent ($700) has been used, leaving $2,100 ($2,800 - $700) as the prepaid rent amount that would appear on the balance sheet.

Question 14

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 initial entry records the total purchase as an asset, and the adjustment is made to recognize the expense of the supplies consumed.

Question 15

Prepaid advertising,representing payment for the next quarter,would be reported on the balance sheet as a(n)
A) asset
B) liability
C) contra asset
D) stockholders' equity

Accepted Answer

Prepaid advertising is a payment made in advance for a service that will be received in the future. Since the payment has already been made, it represents a current asset for the company and should be reported on the balance sheet as such.

Question 16

Accrued revenues would appear on the balance sheet as
A) assets
B) liabilities
C) common stock
D) prepaid expenses

Accepted Answer

Accrued revenues are earned but not yet received or recorded, so they are considered assets.

Question 17

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 represent wages earned by employees but not yet paid by the employer. Therefore, to record this adjusting entry, we need to debit Wages Expense (an income statement account) to recognize the expense and credit Wages Payable (a current liability account) to recognize the obligation to pay the wages in the future.

Question 18

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 which reduces the value of the related asset on the balance sheet. Depreciation Expense is an expense account which is reported on the income statement and represents the amount of depreciation recognized during the period. Therefore, Accumulated Depreciation is classified as a contra asset account and Depreciation Expense is classified as an expense account.

Question 19

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 account because it represents a payment made in advance for insurance coverage. Additionally, the normal balance for an asset account is a debit. Therefore, the correct choice is option B, asset and debit.

Question 20

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

The adjusting entry to record the depreciation of a building for the fiscal period is to debit Depreciation Expense and credit Accumulated Depreciation. This entry reflects the portion of the cost of the building that has been allocated as an expense for the current period and the accumulation of depreciation that has been recorded on the building's balance sheet over time. Option A is incorrect because it is missing the credit to the Accumulated Depreciation account. Option C is incorrect because it records the debit to the Accumulated Depreciation account, which is incorrect. Option D is incorrect because it records the debit to the Building account, which would increase its balance, instead of reflecting the decrease in value due to depreciation.

Quiz 3: The Adjusting Process

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?

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 the accounts for salaries accrued at the end of the accounting period is

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

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

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 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 31 were $2,000.The amount to be used for the appropriate adjusting entry is

The type of account and normal balance of Unearned Consulting Fees 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 for the cost of supplies used during the accounting period is

The cost of office supplies to be used in future periods is ordinarily shown on the balance sheet as a(n)

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

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

Prepaid advertising,representing payment for the next quarter,would be reported on the balance sheet as a(n)

Accrued revenues would appear on the balance sheet as

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

Accumulated Depreciation and Depreciation Expense are classified,respectively,as

The type of account and normal balance of Prepaid Insurance is

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