Question 1

A company's Office Supplies account shows a beginning balance of $600 and an ending balance of $400.If office supplies expense for the year is $3,100,what amount of office supplies was purchased during the period?

Accepted Answer

The total amount of office supplies purchased during the period can be calculated by adding the beginning balance, purchases, and subtracting the ending balance. 
Thus, office supplies purchased = beginning balance + purchases - ending balance 
We are given the beginning balance as $600 and the ending balance as $400. 
We are also given the total office supplies expense for the year as $3,100. 
Thus, purchases = office supplies expense - beginning balance + ending balance 
= $3,100 - $600 + $400 
= $2,900 
Hence, the answer is B) $2,900.

Question 2

On April 1,Griffith Publishing Company received $1,548 from Santa Fe,Inc.for 36-month subscriptions to several different magazines.The subscriptions started immediately.What is the amount of revenue that should be recorded by Griffith Publishing Company for the second year of the subscription assuming the company uses a calendar reporting period?

Accepted Answer

The total subscription amount of $1,548 is for 36 months. For the second year (12 months), the revenue recognized would be (12/36) * $1,548 = $516.

Question 3

What is the proper adjusting entry at December 31,the end of the accounting period,if the balance in the prepaid insurance account is $7,750 before adjustment,and the unexpired amount per analysis of policies is,$3,250?

Accepted Answer

The correct adjusting entry is to recognize the insurance expense for the period. The initial prepaid insurance balance is $7,750, and the unexpired amount (still prepaid) at the end of the period is $3,250. The difference, $4,500 ($7,750 - $3,250), represents the insurance expense for the period. Therefore, you debit Insurance Expense to increase it by $4,500 and credit Prepaid Insurance to decrease it by $4,500, reflecting the amount of the prepaid insurance that has been used up during the period.

Question 4

If accrued salaries were recorded on December 31 with a debit to Salaries Expense and a credit to Salaries Payable,the entry to record payment of these wages on the following January 5 would include:

Accepted Answer

Since the accrued salaries were recorded with a credit to Salaries Payable, we need to decrease or offset this liability by debiting it when we pay the wages. The corresponding credit will be to Cash, as we are paying the employees. Option A, D and E are incorrect as they either debit an incorrect account or do not record the transaction at all. Option B is also incorrect as there is no concept of prepaid salaries in accounting.

Question 5

On January 1,Eastern College received $1,200,000 from its students for the spring semester that it recorded in Unearned Tuition and Fees.The term spans four months beginning on January 2 and the college spreads the revenue evenly over the months of the term.What amount of tuition revenue should the college recognize on February 28?

Accepted Answer

The college should recognize $300,000 of tuition revenue on February 28 because the term spans four months and the college spreads the revenue evenly over the months of the term.

Question 6

On January 1,Fashion Forward Magazine received $15,000 from subscribers for the annual subscriptions that it recorded in Unearned Subscription Revenue.The issues of the magazine are mailed to subscribers quarterly.What amount of tuition revenue should the magazine recognize on March 31 when the first issue is sent in March?

Accepted Answer

The magazine should recognize revenue for one quarter of the annual subscription, which is $15,000/4 = $3,750, as the first issue is sent in March.

Question 7

Incurred but unpaid expenses that are recorded during the adjusting process with a debit to an expense and a credit to a liability are:

Accepted Answer

Incurred but unpaid expenses are referred to as accrued expenses. They are recorded as an expense and a liability because the amount is owed but has not yet been paid. This is done during the adjusting process to ensure accurate financial statements.

Question 8

If a company records prepayment of expenses in an asset account,the adjusting entry when all or part of the prepaid asset is used or expired would:

Accepted Answer

The adjusting entry when a prepaid asset is used or expired involves reducing or expensing the asset and recognizing the related expense. This results in a debit to an expense account and a credit to an asset account. This correctly reflects the use or expiration of the prepaid expense and its impact on the financial statements.

Question 9

A company pays each of its two office employees each Friday at the rate of $100 per day for a five-day week that begins on Monday.If the monthly accounting period ends on Tuesday and the employees worked on both Monday and Tuesday,the month-end adjusting entry to record the salaries earned but unpaid is:

Accepted Answer

Each employee earns $100 per day, and both worked for 2 days (Monday and Tuesday), making it 2 days * 2 employees * $100/day = $400. The adjusting entry should recognize the expense incurred (Salaries Expense) and the obligation to pay (Salaries Payable).

Question 10

Wilson Company paid insurance premiums for four months in advance on November 1.The balance in the prepaid insurance account before adjustment at the end of the year is $4,800 and no adjustments had been made previously.The adjusting entry required on December 31 is:

Accepted Answer

The adjusting entry required on December 31 is to debit Insurance Expense for $2,400 and credit Prepaid Insurance for $2,400. This is because the company has paid for four months of insurance in advance, and two of those months have already passed. Therefore, the company has used up $2,400 of prepaid insurance and needs to record this expense.

Question 11

On May 1,a two-year insurance policy was purchased for $18,000 with coverage to begin immediately.What is the amount of insurance expense that would appear on the company's income statement for the first year ended December 31?

Accepted Answer

The insurance expense for the first year is $18,000 * 12/24 = $9,000. However, the policy was purchased on May 1, so the expense for the first year is only for 8 months, or $9,000 * 8/12 = $6,000.

Question 12

Fragmental Co.leased a portion of its store to another company for eight months beginning on October 1,at a monthly rate of $800.Fragmental collected the entire $6,400 cash on October 1 and recorded it as unearned revenue.The journal entry made by Fragmental Co.at year-end on December 31 would be:

Accepted Answer

Fragmental Co. needs to recognize the earned portion of the rent for the three months (October, November, December) which is $800 x 3 = $2,400. Therefore, they debit Unearned Rent and credit Rent Earned for $2,400.

Question 13

A company purchased a new delivery van at a cost of $45,000 on July 1.The truck is estimated to have a useful life of 6 years and a salvage value of $3,000.The company uses the straight-line method of depreciation.How much depreciation expense will be recorded for the van during the first year ended December 31?

Accepted Answer

The annual depreciation expense is calculated as (Cost - Salvage Value) / Useful Life = ($45,000 - $3,000) / 6 = $7,000. Since the van was purchased on July 1, only half a year of depreciation is recorded for the first year: $7,000 / 2 = $3,500.

Question 14

The difference between the cost of an asset and the accumulated depreciation for that asset is called

Accepted Answer

The difference between the cost of an asset and the accumulated depreciation for that asset is called book value.

Question 15

The adjusting entry to record the salaries earned due to employees for services provided but unpaid at the end of the accounting period affects the accounts in which of the following ways?

Accepted Answer

The adjusting entry for salaries earned but unpaid at the end of the accounting period would involve debiting the Salaries Expense account to recognize the expense, and crediting the Salaries Payable account to record the liability for the unpaid salaries. Therefore, the correct choice is E - Debit Salaries Expense and credit Salaries Payable.

Question 16

On May 1,Sellers Marketing Company received $1,500 from Franco Marcelli for a marketing campaign effective from May 1 this year to April 30 of the following year.The Cash receipt was recorded as unearned fees and at year-end on December 31,$1,000 of the fees had been earned.The adjusting entry on December 31 would be:

Accepted Answer

The adjusting entry is meant to recognize the portion of the unearned fees that have been earned as of year-end. Since $1,000 of the $1,500 has been earned, the entry will involve debiting Unearned Fees (liability account) for $1,000 and crediting Fees Earned (revenue account) for $1,000. This will reduce the liability account and recognize the earned revenue.

Question 17

A company pays its employees $4,000 each Friday,which amounts to $800 per day for the five-day workweek that begins on Monday.If the monthly accounting period ends on Thursday and the employees worked through Thursday,the amount of salaries earned but unpaid at the end of the accounting period is:

Accepted Answer

The answer of A company pays its employees $4,000 each...

Question 18

The adjusting entry at the end of an accounting period to record the unpaid salaries of employees for work provided is:

Accepted Answer

The adjusting entry to record unpaid salaries at the end of an accounting period involves debiting Salaries Expense and crediting Salaries Payable. This is because the employees have already earned the salaries but they have not yet been paid, therefore, the amount owed to them is recorded as a liability in the Salaries Payable account. The Salaries Expense is debited to recognize the expense for the period, regardless of whether or not the salaries have been paid. Option D correctly describes this adjusting entry.

Question 19

On April 1,Griffith Publishing Company received $1,548 from Santa Fe,Inc.for 36-month subscriptions to several different magazines.The subscriptions started immediately.What is the amount of revenue that should be recorded by Griffith Publishing Company for the first year of the subscription assuming the company uses a calendar reporting period?

Accepted Answer

The answer of On April 1,Griffith Publishing Company received $1,548...

Question 20

On December 1,Simpson Marketing Company received $3,600 from a customer for a marketing plan to be completed January 31 of the following year.The cash receipt was recorded as unearned fees.The adjusting entry for the year ended December 31 would include:

Accepted Answer

The adjusting entry would recognize the portion of the unearned fees that have been earned by December 31. Since the service is to be completed over two months, half of the $3,600, which is $1,800, would be recognized as earned. Therefore, Unearned Fees would be debited by $1,800 to reduce the liability, and Earned Fees would be credited by $1,800 to recognize the revenue.

Quiz 3: Adjusting Accounts and Preparing Financial Statements