Question 1

Drawing is recorded in the Balance Sheet Debit column of a work sheet.

Accepted Answer

Drawings are recorded as a reduction in the owner's equity, which is a debit entry in the balance sheet section of a worksheet.

Question 2

The owner's Drawing account will not appear on an adjusted trial balance on the work sheet.

Accepted Answer

The owner's Drawing account is a temporary equity account that reflects withdrawals made by the owner from the business for personal use. It does appear on the adjusted trial balance on the worksheet to ensure that all accounts are properly accounted for and balanced before preparing financial statements.

Question 3

Accumulated depreciation appears on the income statement.

Accepted Answer

Accumulated depreciation is a contra-asset account that appears on the balance sheet, not the income statement. It represents the total amount of depreciation charged to an asset over its useful life.

Question 4

An asset's book value represents the true market value of the asset.

Accepted Answer

The book value of an asset is the value at which it is recorded on a company's balance sheet, based on its historical cost less accumulated depreciation. This value may not accurately reflect the current market value of the asset.

Question 5

If the adjustment for accrued wages is omitted, liabilities and expenses will be overstated.

Accepted Answer

If the adjustment for accrued wages is omitted, liabilities and expenses will be understated, not overstated. This is because the actual amount owed to employees has not been recognized as a liability, and the expense of the wages earned has not been recognized in the period in which they were earned.

Question 6

Failure to record the adjusting entry for accrued wages results in the current year's net income being overstated.

Accepted Answer

Accrued wages represent an expense incurred by the company but not yet paid to employees. If the adjusting entry for accrued wages is not recorded, the current year's expenses will be understated, and net income will be overstated. This is because the expense was incurred in the current year but not yet recorded, and as a result, the company pretends to be more profitable than it actually is.

Question 7

The maximum period covered by a work sheet is six months.

Accepted Answer

There is no set limit to the period covered by a worksheet. It can cover any duration, from a day to several years, depending on the purpose and scope of the worksheet.

Question 8

Accounts that are partly income statement amounts and partly balance sheet amounts are called mixed accounts.

Accepted Answer

Mixed accounts combine elements of both income statement and balance sheet accounts. Examples include prepaid expenses, unearned revenues, and accrued liabilities.

Question 9

The expiration of usefulness of equipment during an accounting period is called depreciation.

Accepted Answer

Depreciation is the decrease in value of an asset over time due to wear and tear, obsolescence, or other factors. It is systematically allocated as an expense over the useful life of the asset in order to accurately reflect its decreasing value in the company's financial statements.

Question 10

Sunny Day Company has $740 of supplies reported on its unadjusted trial balance as of July 31. During the month of July Sunny Day Company used $325 worth of supplies. What is the entry to adjust supplies?
A) 
$\begin{array} { l r } 
\text { Supplies Expense } & \$ 325 \
\text { Cash } & \$ 325
\end{array}$
B) 
$\begin{array} { l } 
\text { Supplies }&\$ 415 \
\text { Supplies Expense }&\$ 415
\end{array} $
C) 
Supplies Expense $\quad\$ 415$
Supplies $\quad \$ 415$
D) 
Supplies Expense $\quad\$ 325$
Supplies$\quad\$ 325$

Accepted Answer

The correct entry to adjust for supplies used is to debit Supplies Expense and credit Supplies for the amount used ($325), reflecting the decrease in supplies and the expense incurred.

Question 11

A fiscal period must begin on January 1.

Accepted Answer

A fiscal period can begin on any date chosen by the organization. It does not have to begin on January 1.

Question 12

The owner's Capital account is shown in the Income Statement Credit column on a work sheet.

Accepted Answer

The owner's Capital account is shown in the Balance Sheet Credit column on a work sheet, not in the Income Statement Credit column.

Question 13

Financial statements are prepared by taking the figures directly from the work sheet.

Accepted Answer

Financial statements are prepared by using the adjusted balances of accounts from the work sheet, which summarizes the financial information and adjustments made during the accounting period.

Question 14

In recording the adjusting entries for depreciation, both accounts involved are increased.

Accepted Answer

The answer of In recording the adjusting entries for depreciation,...

Question 15

As equipment is depreciated, its book value increases and its accumulated depreciation increases.

Accepted Answer

As equipment is depreciated, its book value decreases and its accumulated depreciation increases.

Question 16

The work sheet is used to pull together up-to-date account balances needed to prepare the financial statements.

Accepted Answer

The work sheet is a tool used by accountants to prepare adjusting entries and pull together account balances to prepare the financial statements.

Question 17

Because adjusting entries are recorded on a work sheet, they do not need to be journalized or posted.

Accepted Answer

Although adjusting entries are recorded on a work sheet, they still need to be journalized and posted to the general ledger and subsidiary ledgers. The purpose of the work sheet is to help prepare financial statements, but the journal entries still need to be made in order to update the accounts.

Question 18

Failure to record the adjusting entry for depreciation results in assets and owner's equity being overstated on the balance sheet.

Accepted Answer

Failure to record the adjusting entry for depreciation means that the asset's book value (historical cost less accumulated depreciation) is not updated to reflect the decrease in value over time, resulting in an overstatement of the asset's value and therefore an overstatement of owner's equity on the balance sheet.

Question 19

Failure to record the adjusting entry for depreciation will overstate assets on the balance sheet.

Accepted Answer

Depreciation is the process of allocating the cost of a long-term asset over its useful life. Failure to record the adjusting entry for depreciation will result in the overstatement of the value of the asset on the balance sheet, because the asset's cost has not been reduced by the amount of depreciation that should have been recorded. This overstatement of assets will also result in an overstatement of net income on the income statement, because expenses (such as depreciation) have not been properly recognized.

Question 20

In recording the adjusting entry for accrued wages, all the accounts involved are decreased.

Accepted Answer

In recording the adjusting entry for accrued wages, the Wage Expense account is increased and the Accrued Wages Payable account is also increased, resulting in a total increase in accounts.

Quiz 4: Adjusting Entries and the Work Sheet