Question 1

On the work sheet, the adjusted balance of Unearned Revenue appears in the

Accepted Answer

Unearned Revenue is a liability account, which represents revenue that has been collected but not yet earned. The adjusted balance of Unearned Revenue appears in the Balance Sheet Credit column, as it is a credit balance.

Question 2

The Unearned Revenue account would be used when a company

Accepted Answer

The Unearned Revenue account represents cash received by a company in advance of services to be provided or goods to be delivered. Option B describes a situation where the revenue is earned over two fiscal periods, indicating that the cash received in advance is recorded as unearned revenue until the services are provided or goods are delivered, and the revenue can be recognized as earned. Option A describes a situation where the revenue is earned in the same fiscal period as the cash is received, so there would be no need to account for unearned revenue. Options C and D describe situations where cash is being paid, not received, so they are not relevant to the Unearned Revenue account. Therefore, the best choice is B.

Question 3

Royal Theater credited Unearned Revenue of $35,000 for tickets sold for its season of four plays, which will be presented at the end of one fiscal period and the beginning of the next. As of December 31, the end of their fiscal period, Royal Theater had earned $16,000. The adjusting entry is

Accepted Answer

The adjusting entry should decrease the balance of the Unearned Revenue account by the amount that has been earned as of the end of the fiscal period, which is $16,000. The corresponding credit entry should be made to the Ticket Income account. Therefore, the correct entry is to debit Unearned Revenue for $16,000 and credit Ticket Income for $16,000, as shown in choice C.

Question 4

Adjusting entries are journalized and posted in a noncomputerized system

Accepted Answer

Adjusting entries are made after the worksheet is completed but before the financial statements are prepared. This ensures that the financial statements reflect all revenues earned and expenses incurred during the period.

Question 5

Unearned Revenue is classified as a(n)

Accepted Answer

Unearned Revenue represents a liability account, because the company has received payment for goods or services that have not yet been provided or earned. This means that the company owes the customer the services, and the liability will be converted to revenue when the service is provided or when the earned revenue is recognized.

Question 6

If the wages payable account had a normal balance of $4,500 before adjustment and an adjustment was made debiting the account for $500, then the account would appear on the work sheet as a:

Accepted Answer

The adjustment debits the wages payable account, reducing its balance from $4,500 to $4,000, resulting in a credit balance in the balance sheet columns.

Question 7

Unearned Revenue appears in the

Accepted Answer

Unearned revenue is a liability account and has a credit balance. It appears in the Trial Balance Credit column and Adjustments Debit column because it needs to be adjusted to its earned amount. After adjustment, it will be credited, so it appears in the Adjusted Trial Balance Credit column and Balance Sheet Credit column. It does not appear in the Income Statement because it is not an expense or revenue account.

Question 8

In the Adjustments columns of the work sheet, the credit to the Merchandise Inventory account (using the periodic system) represents

Accepted Answer

In the periodic inventory system, the credit to the Merchandise Inventory account in the Adjustments column represents the beginning inventory, which is adjusted to account for the cost of goods sold calculation.

Question 9

The Prepaid Insurance account has a balance of $200 less in the work sheet's Balance Sheet Debit column than in the work sheet's Trial Balance Debit column. This would be the result of a

Accepted Answer

A $200 entry to Prepaid Insurance in the work sheet's Adjustments Credit column would decrease the balance in the Balance Sheet Debit column, reflecting the portion of the prepaid insurance that has been used up or expired during the period.

Question 10

Wages Expense has a balance of $55,400 in the Trial Balance Debit column of a work sheet. The Adjustments Credit column contains a $500 credit to Wages Payable. The Adjusted Trial Balance columns will show

Accepted Answer

The adjusted balance of Wages Payable will be $500. This credit entry reduces the balance of Wages Expense. Therefore, the adjusted balance of Wages Expense will be $55,900 (55,400-500). Hence, the correct answer is D.

Question 11

On the work sheet, the amount of the beginning merchandise inventory appears in the

Accepted Answer

The answer of On the work sheet, the amount of...

Question 12

At the time a firm adjusts Merchandise Inventory, the Income Summary account

Accepted Answer

The Income Summary account has no balance at the time a firm adjusts Merchandise Inventory because all revenue and expense accounts have been closed into it.

Question 13

Net income appears on the work sheet in the

Accepted Answer

Net income appears on the work sheet in the Income Statement Debit column because it represents the excess of revenues over expenses, which is shown as a debit to balance the income statement section.

Question 14

If the Unearned Revenue account had an unadjusted normal balance of $3,800, and an adjustment was made debiting the account for $500, the amount would appear in the Adjusted Trial Balance columns of the work sheet as a

Accepted Answer

Unearned Revenue is a liability account with a normal credit balance. If it is debited for $500, the balance decreases, resulting in a $3,300 credit balance in the Adjusted Trial Balance.

Question 15

In the completed work sheet, which of the following sets of columns would contain the two balances in the Income Summary account representing beginning and ending inventory when using the periodic inventory system?

Accepted Answer

The balancing of beginning and ending inventory for the Income Summary account is done in the Adjustments column, as it reflects the adjustments made for inventory during the accounting period. The Income Statement columns would contain the revenue and expense accounts, while the Balance Sheet columns would contain the assets, liabilities, and equity accounts. Therefore, the set of columns that would contain the two balances in the Income Summary account representing beginning and ending inventory when using the periodic inventory system is the Adjustments and Income Statement columns.

Question 16

A baseball team records ticket revenue received in advance as Unearned Revenue. On the team's work sheet, the required adjusting entry is

Accepted Answer

The adjusting entry for recording ticket revenue received in advance as Unearned Revenue is to debit Unearned Revenue and credit Revenue. This is because the revenue has not yet been earned until the game or event takes place, and therefore cannot be recognized as Revenue until that time. Option A and C are incorrect because they debit Cash, which is not the appropriate account to record the adjusting entry. Option B is incorrect because it would credit Unearned Revenue, which is already recorded in the account. Option E is incorrect because there is no account called "Unearned Revenue Income."

Question 17

The Income Statement Debit column exceeds the Income Statement Credit column on a work sheet. This indicates

Accepted Answer

A debit balance in the Income Statement column indicates that expenses exceed revenues, resulting in a net loss for the company.

Question 18

If the trial balance amount of Unearned Pest Spray Revenue is $50,000, and $40,000 has been earned by the end of the fiscal period, the adjustment would be

Accepted Answer

Unearned revenue is initially recorded as a liability. When a portion of it is earned, the correct adjustment is to decrease the liability (Unearned Pest Spray Revenue) and increase revenue (Pest Spray Revenue). This is done by debiting Unearned Pest Spray Revenue and crediting Pest Spray Revenue.

Question 19

The ending merchandise inventory (using the periodic system) is placed on the books by an adjusting entry

Accepted Answer

The ending merchandise inventory is an asset and should be recorded by debiting Merchandise Inventory. Since the periodic system is used, the inventory will be adjusted by taking a physical count at the end of the period. The adjusting entry to record this inventory should increase the value of the asset and decrease the value of the expense. Therefore, the entry should debit Merchandise Inventory and credit Income Summary. This will increase the value of the inventory and decrease the value of the cost of goods sold, which is included in the Income Summary account.

Question 20

Online Computer Services follows accrual-based accounting. It receives $7,000 in advance for services to be performed in both the current and following fiscal period. Which of the following entries records this transaction?

Accepted Answer

Since the $7,000 is received in advance for services to be performed in the future, it should be recorded as a liability. The account that represents this liability is called Unearned Service Revenue. Therefore, the correct journal entry is a debit to Cash (asset account) and a credit to Unearned Service Revenue (liability account). Option C is the only choice that records this transaction correctly. Option A records the transaction as if the services have already been performed, which is incorrect. Option B records a liability to pay someone else, which is not applicable in this situation. Option D and E reverse the debit and credit accounts, which is also incorrect.

Quiz 11: Work Sheet and Adjusting Entries