Question 1

Which of these accounts would normally not be affected by an adjustment?

Accepted Answer

Cash is a balance sheet account and not affected by adjustments, which are made to income statement accounts such as supplies, revenues, and expenses.

Question 2

During the month,a company uses up $4,000 of supplies.At the end of the month,the related adjusting journal entry would result in:

Accepted Answer

The use of supplies results in a decrease in the asset account "Supplies" and an increase in the expense account "Supplies Expense." This is because the supplies have been used up during the month and are no longer available for use by the company. There is no change in liabilities or shareholders' equity as a result of this transaction.

Question 3

The company uses up $5,000 of the book value of an existing asset.The company adjusts its accounts accordingly.Which of the following is a true statement?

Accepted Answer

This is a deferral adjustment because the company is reducing the book value of an existing asset by $5,000, which means they previously recorded the asset at a higher value. This adjustment defers the recognition of the expense associated with the asset until a later period.

Question 4

A company owes rent at a rate of $6,000 per month.The company pays the rent owed on the tenth of each month for the previous month.At the end of each month,what kind of adjustment is required?

Accepted Answer

The company is incurring an expense but is not paying for it until the following month. Therefore, an accrual adjustment is required to properly record the expense in the correct accounting period.

Question 5

If certain assets are partially used up during the accounting period,then:

Accepted Answer

If certain assets are partially used up during the accounting period, then an asset account is decreased or eliminated and an expense is recorded. This is known as the matching principle, which requires that expenses be recognized in the same period as the related revenue. By recording the partial use of an asset as an expense, the financial statements accurately reflect the cost of generating revenue in that period.

Question 6

On December 31,a decision is made to accrue an expense and report a current liability.How many accounts will be included in this journal entry?

Accepted Answer

Accruing an expense and reporting a current liability requires two accounts - an expense account and a liability account. Additional accounts may be included depending on the specifics of the transaction, but at minimum, there will be two accounts.

Question 7

Purrfect Pets had $6,000 of supplies at the end of October.During November,the company bought $2,000 of supplies.At the end of November,the company had $1,000 of supplies remaining.Which of the following statements is not true?

Accepted Answer

Option A is true as the company bought $2,000 of supplies and had $1,000 remaining, meaning they used $7,000 of supplies in November.
Option B is true as the carrying value of supplies on November 30th is $1,000 (ending supplies).
Option C is true as the company used $7,000 of supplies during November, so an expense should be debited for $7,000.
Option D is not true as the ending supplies carry a value of $1,000 and not the full amount of supplies used during the month, which was $7,000. Therefore, the expense debited in November should not be $1,000.

Question 8

Declared dividends:

Accepted Answer

Declared dividends are a way for a company to distribute profits to its shareholders. While they are not a legal obligation, they are typically expected by shareholders and failing to pay them can impact the company's reputation and stock price. Declared dividends are not an expense of doing business, so they are not recorded as a liability.

Question 9

A company makes a deferral adjustment that reduces a liability.This must mean:

Accepted Answer

The answer of A company makes a deferral adjustment that...

Question 10

Which of the following is not the value at which an asset is reported on a financial statement?

Accepted Answer

The depreciated value is not a commonly used term to refer to the value of an asset on a financial statement. The carrying value, book value, and net book value are all common ways of reporting an asset's value.

Question 11

Accrual adjustments link:

Accepted Answer

The answer of Accrual adjustments link:
...

Question 12

When the future benefits of existing assets are used up in the ordinary course of business:

Accepted Answer

When the future benefits of existing assets are used up in the ordinary course of business, it leads to an expense being recorded in the income statement to reflect the decrease in the value of the asset used.

Question 13

An adjusting journal entry that includes an increase to a contra-asset account would include an increase in a(n):

Accepted Answer

An adjusting journal entry that includes an increase to a contra-asset account (which is used to reduce the value of an asset) typically involves an increase in an expense account. This is because the adjustment usually reflects the consumption of an asset's value, such as through depreciation or amortization, which is recorded as an expense.

Question 14

Purrfect Pets had income before income tax of $164,000 last quarter and a 34% tax rate.Its net income should be reported as:

Accepted Answer

To calculate the net income, we need to subtract the income tax from the income before income tax. 
Income tax = 0.34 x $164,000 = $55,760 
Net income = $164,000 - $55,760 = $108,240. Option B is the correct answer.

Question 15

A company has an asset account,Prepaid Utilities,with a balance of $3,750 at the beginning of the month.The company used $980 of utilities during the month.Which of the following statements is true?

Accepted Answer

The answer of A company has an asset account,Prepaid Utilities,with...

Question 16

One major difference between deferral and accrual adjustments is:

Accepted Answer

Deferral adjustments involve transactions that have already been recorded but need to be recognized in a different accounting period, while accrual adjustments involve recognizing revenue or expenses that have not yet been recorded but occurred during the current accounting period. So, deferral adjustments involve previously recorded transactions and accruals involve new transactions. The other choices are incorrect.

Question 17

To calculate the company's income tax expense for the current period,it is necessary to know:

Accepted Answer

To calculate the company's income tax expense, we need to know the company's income before income taxes and the company's tax rate. Operating revenue, tax bill from prior periods, operating expenses, and net income from the previous period are not sufficient to calculate the current period's income tax expense.

Question 18

One major difference between deferral and accrual adjustments is:

Accepted Answer

The answer of One major difference between deferral and accrual...

Question 19

If an expense has been incurred but will be paid later,then:

Accepted Answer

When an expense has been incurred but will be paid later, it creates a liability for the company to pay in the future. Therefore, a liability account is created or increased to record the amount owed, and an expense is also recorded to reflect the cost incurred. This approach follows the accrual accounting principle, where transactions are recognized when they occur, rather than when they are paid.

Question 20

At the end of the month,the adjusting journal entry to record the use of supplies would include:

Accepted Answer

The adjusting journal entry to record the use of supplies is to debit the expense account, which reflects the amount of supplies used, and credit the supplies account, which reduces the balance of supplies on hand. Therefore, option B is the correct choice: a credit to supplies and a debit to expenses.

Quiz 4: Adjustments,financial Statements,and Financial Results

Which of these accounts would normally not be affected by an adjustment?

During the month,a company uses up $4,000 of supplies.At the end of the month,the related adjusting journal entry would result in:

The company uses up $5,000 of the book value of an existing asset.The company adjusts its accounts accordingly.Which of the following is a true statement?

A company owes rent at a rate of $6,000 per month.The company pays the rent owed on the tenth of each month for the previous month.At the end of each month,what kind of adjustment is required?

If certain assets are partially used up during the accounting period,then:

On December 31,a decision is made to accrue an expense and report a current liability.How many accounts will be included in this journal entry?

Purrfect Pets had $6,000 of supplies at the end of October.During November,the company bought $2,000 of supplies.At the end of November,the company had $1,000 of supplies remaining.Which of the following statements is not true?

Declared dividends:

A company makes a deferral adjustment that reduces a liability.This must mean:

Which of the following is not the value at which an asset is reported on a financial statement?

Accrual adjustments link:

When the future benefits of existing assets are used up in the ordinary course of business:

An adjusting journal entry that includes an increase to a contra-asset account would include an increase in a(n) :

Purrfect Pets had income before income tax of $164,000 last quarter and a 34% tax rate.Its net income should be reported as:

A company has an asset account,Prepaid Utilities,with a balance of $3,750 at the beginning of the month.The company used $980 of utilities during the month.Which of the following statements is true?

One major difference between deferral and accrual adjustments is:

To calculate the company's income tax expense for the current period,it is necessary to know:

One major difference between deferral and accrual adjustments is:

If an expense has been incurred but will be paid later,then:

At the end of the month,the adjusting journal entry to record the use of supplies would include: