Question 1

If accrued salaries were recorded on December 31 with a credit to Salaries Payable, the entry to record payment of these wages on the following January 5 would include:
A) A debit to Cash and a credit to Salaries Payable.
B) A debit to Cash and a credit to Prepaid Salaries.
C) A debit to Salaries Payable and a credit to Cash.
D) A debit to Salaries Payable and a credit to Salaries Expense.
E) No entry would be necessary on January 5.

Accepted Answer

Since the accrued salaries were recorded with a credit to Salaries Payable, it means that Salaries Payable has a credit balance. When the wages are paid on January 5, Cash would be debited for the amount paid, and Salaries Payable, which has a credit balance, would be credited. This would bring the balance of Salaries Payable back to zero. Therefore, the entry to record payment of these wages on January 5 would be a debit to Salaries Payable and a credit to Cash.

Question 2

On April 30, 2014, a three-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 year ended December 31, 2014?
A) $500
B) $4,000
C) $6,000
D) $14,000
E) $18,000

Accepted Answer

The answer of On April 30, 2014, a three-year insurance...

Question 3

A company purchased a new truck at a cost of $42,000 on July 1, 2014. The truck is estimated to have a useful life of 6 years and a salvage value of $3,000. Using the straight- line method, how much depreciation expense will be recorded for the truck for the year ended December 31, 2014?
A) $3,250
B) $3,500
C) $4,000
D) $6,500
E) $7,000

Accepted Answer

The answer of A company purchased a new truck at...

Question 4

The adjusting entry to record the earned but unpaid salaries of employees at the end of an accounting period is:
A) Debit Unpaid Salaries and credit Salaries Payable
B) Debit Salaries Payable and credit Salaries Expense
C) Debit Salaries Expense and credit Cash
D) Debit Salaries Expense and credit Salaries Payable
E) Debit Cash and credit Salaries Expense

Accepted Answer

The adjusting entry to record the earned but unpaid salaries of employees at the end of an accounting period is to debit Salaries Expense and credit Salaries Payable. This entry recognizes the expense in the period it was earned and establishes a liability for the amount owed to employees. Option A is incorrect because it reverses the debit and credit accounts. Option B is incorrect because it debits Salaries Payable and credits Salaries Expense, which is the opposite of what is required. Option C is incorrect because it debits Salaries Expense and credits Cash, which does not reflect the fact that employees have not yet been paid. Option E is incorrect because it debits Cash and credits Salaries Expense, which only reflects the payment of salaries, not the recognition of the liability.

Question 5

A company recorded two days of accrued salaries of $1,400 for its employees on January 31. On February 9, it paid its employees for these accrued salaries and for other salaries earned through February 9. The January 31 and February 9 journal entries are:
A)
$$\begin{array} { | l | c | r | r | } 
\hline 1 / 31 & \text { Salaries Expense } & 1,400 & \
\hline & \text { Salaries Payable } & & 1,400 \
\hline 2 / 9 & \text { Salaries Payable } & 7,000 & \
\hline & \text { Salaries Expense } & 1,400 & \
\hline & \text { Cash } & & 7,000 \
\hline
\end{array}$$
B) $$\begin{array} { | l | c | r | r | } 
\hline 1 / 31 & \text { Salaries Payable } & 1,400 & \
\hline & \text { Salaries Expense } & & 1,400 \
\hline \text { 2/9 } & \text { Salaries Expense } & 5,600 & \
\hline & \text { Salaries Payable } & 1,400 & \
\hline & \text { Cash } & & 7,000 \
\hline
\end{array}$$
C) $$\begin{array} { | l | c | c | c | } 
\hline 1 / 31 & \text { Salaries Expense } & 1,400 & \
\hline & \text { Cash } & & 1,400 \
\hline 2 / 9 & \text { Salaries Expense } & 7,000 & \
\hline & \text { Cash } & & 7,000 \
\hline
\end{array}$$
D) $$\begin{array} { | l | c | c | c | } 
\hline 1 / 31 & \text { Salaries Expense } & 1,400 & \
\hline & \text { Salaries Payable } & & 1,400 \
\hline 2 / 9 & \text { Salaries Expense } & 7,000 & \
\hline & \text { Cash } & & 7,000 \
\hline
\end{array}$$
E) $$\begin{array} { | l | c | r | r | } 
\hline 1 / 31 & \text { Salaries Expense } & 1,400 & \
\hline & \text { Salaries Payable } & & 1,400 \
\hline \text { 2/9 } & \text { Salaries Expense } & 5,600 & \
\hline & \text { Salaries Payable } & 1,400 & \
\hline & \text { Cash } & & 7,000 \
\hline
\end{array}$$

Accepted Answer

The January 31 entry records the accrued salaries as a liability (Salaries Payable) and an expense. On February 9, the company pays the total salaries, which includes the accrued amount, so Salaries Payable is debited to remove the liability, and the remaining amount is recorded as Salaries Expense.

Question 6

The difference between the cost of an asset and the accumulated depreciation for that asset is called
A) Depreciation Expense
B) Unearned Depreciation
C) Prepaid Depreciation
D) Depreciation Value
E) Book Value

Accepted Answer

The difference between the cost of an asset and the accumulated depreciation for that asset is called the book value. This represents the net value of the asset on the company's balance sheet.

Question 7

On May 1, 2014, Giltus Advertising Company received $1,500 from Julie Bee for advertising services to be completed April 30, 2015. The cash receipt was recorded as unearned fees. At December 31, 2014, $500 of the fees had been earned. The adjusting entry on December 31, 2014, should include:
A) A debit to Unearned Fees for $500.
B) A credit to Unearned Fees for $500.
C) A credit to Earned Fees for $1,000.
D) A debit to Earned Fees for $1,000.
E) A debit to Earned Fees for $500.

Accepted Answer

The answer of On May 1, 2014, Giltus Advertising Company...

Question 8

On December 31, the balance in the Prepaid Advertising account was $176,000, which is the remaining balance of a 12-month advertising campaign purchased on August 31 in the current year. Assuming the cost is spread equally over each month, how much did this advertising campaign cost in total?
A) $286,000
B) $176,000
C) $264,000
D) $154,000
E) $22,000

Accepted Answer

The advertising campaign was purchased on August 31 and the balance on December 31 is $176,000. This means that there are four months remaining in the campaign (September through December). If the cost is spread equally over each month, then the monthly cost would be $176,000/4 = $44,000. Multiply by 12 months to find the total cost of the campaign: $44,000 x 12 = $528,000. Therefore, the best choice is (C) $264,000 which is half of $528,000.

Question 9

On December 31, the balance in the Prepaid Insurance account was $4,500, which is the remaining balance of a 12-month policy purchased on October 31 in the current year. How much did this policy originally cost?
A) $5,400
B) $3,750
C) $4,909
D) $4,500
E) $6,000

Accepted Answer

The policy was purchased on October 31, meaning that it covers November, December, and the following 10 months. Therefore, the policy was originally for 12 months starting from November. To find out the original cost of the policy, we can use the formula:

Original cost = (Remaining balance / Number of months remaining) x 12

Plugging in the values we know from the problem, we get:

Original cost = (4,500 / 10) x 12
Original cost = 540 x 12
Original cost = $6,480

Therefore, the closest answer choice is A) $5,400. Since only one answer choice is close, A) must be the correct choice.

Question 10

Expenses incurred but unpaid that are recorded during the adjusting process with a debit to an expense and a credit to a liability are:
A) Intangible expenses
B) Prepaid expenses
C) Unearned expenses
D) Net expenses
E) Accrued expenses

Accepted Answer

Expenses incurred but unpaid are accrued expenses. They are recorded during the adjusting process with a debit to the expense account and a credit to a liability account. This ensures that the expense is recognized in the period in which it is incurred, even if the actual payment for the expense has not yet been made.

Question 11

ABC Co. leased a portion of its store to another company for eight months beginning on October 1, 2014, at a monthly rate of $800. This other company paid the entire $6,400 cash on October 1, which ABC Co. recorded as unearned revenue. The journal entry made by ABC Co. at year-end on December 31, 2014, would include:
A) A debit to Rent Earned for $2,400.
B) A credit to Unearned Rent for $2,400.
C) A debit to Cash for $6,400.
D) A credit to Rent Earned for $2,400.
E) A debit to Unearned Rent for $4,000.

Accepted Answer

$6,400 x 3/8 = $2,400 rent earned

Question 12

On January 1, Acme College received $1,200,000 in Unearned Tuition Revenue from its students for the spring semester, which spans four months beginning on January 2. What amount of tuition revenue should the college recognize on January 31?
A) $300,000
B) $600,000
C) $800,000
D) $900,000
E) $1,200,000

Accepted Answer

The answer of On January 1, Acme College received $1,200,000...

Question 13

Financial statements are typically prepared in the following order:
A) Balance sheet, statement of retained earnings, income statement.
B) Statement of retained earnings, balance sheet, income statement.
C) Income statement, balance sheet, statement of retained earnings.
D) Income statement, statement of retained earnings, balance sheet.
E) Balance sheet, income statement, statement of retained earnings.

Accepted Answer

The income statement calculates net income for a given period, followed by the statement of retained earnings, which shows changes in retained earnings during that period. Finally, the balance sheet presents a snapshot of a company's financial position on a specific date, which includes its assets, liabilities, and equity. The order of financial statements reflects the logical flow of information in terms of calculating and presenting financial performance and position.

Question 14

The adjusted trial balance contains information pertaining to:
A) Asset accounts only.
B) Balance sheet accounts only.
C) Income statement accounts only.
D) All general ledger accounts.
E) Revenue accounts only.

Accepted Answer

The adjusted trial balance contains information pertaining to all general ledger accounts, including both balance sheet accounts and income statement accounts.

Question 15

If a company records prepayment of expenses in an asset account, the adjusting entry would:
A) Result in a debit to an expense and a credit to an asset account.
B) Cause an adjustment to prior expense to be overstated and assets to be understated.
C) Cause an accrued liability account to exist.
D) Result in a debit to a liability and a credit to an asset account.
E) Decrease cash.

Accepted Answer

Prepaid expenses are initially recorded as an asset because cash has been paid in advance for a future expense. However, at the end of the accounting period, an adjusting entry is made to recognize the portion of the prepaid expense that has been used or expired during that period. This requires a debit to the expense account and a credit to the asset account. This decreases the asset account and increases the expense account, reflecting the actual use of the prepaid expense during the period.

Question 16

On December 31, the balance in the Prepaid Subscription account was $648. This is the remaining balance of a 12-month subscription purchased on September 30 in the current year. How much did this subscription originally cost?
A) $72
B) $648
C) $7,776
D) $864
E) $1,512

Accepted Answer

A 12-month subscription was purchased on September 30, which means the subscription will end on September 30 of the following year. Therefore, the subscription was effective for 3 months in the current year (October, November, and December) and 9 months in the following year (January to September). The monthly cost of the subscription can be calculated by dividing the total cost by the number of months, which is $x/12. Since the remaining balance is $648 after 3 months of use, the original cost of the subscription can be calculated as follows:
$648 = $x/12 * 9
$5,832 = $x
Therefore, the original cost of the subscription was $5,832, which is closest to option D) $864.

Question 17

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?
A) $2,700
B) $2,900
C) $3,300
D) $3,500
E) $3,700

Accepted Answer

To find the amount of office supplies purchased during the period, we need to use the formula:
Beginning balance + Purchases - Ending balance = Expense
Solving for purchases, we get:
Purchases = Expense - Beginning balance + Ending balance
Plugging in the given values, we get:
Purchases = $3,100 - $600 + $400
Purchases = $2,900
Therefore, the answer is B, $2,900.

Question 18

A trial balance prepared after adjustments have been recorded is called a(n):
A) Balance sheet
B) Adjusted trial balance
C) Unadjusted trial balance
D) Classified balance sheet
E) Unclassified balance sheet

Accepted Answer

An adjusted trial balance is prepared after adjustments have been made to the accounts, so it is the best choice. A balance sheet is a financial statement that shows the assets, liabilities, and equity of a business at a specific point in time, but it is not a trial balance. An unadjusted trial balance is prepared before adjustments have been made, so it is not the correct option. A classified balance sheet organizes the assets and liabilities into categories, while an unclassified balance sheet does not, but neither of these terms are related to the preparation of trial balances.

Question 19

An adjusting entry was made on December 31, 2014 to accrue a salary expense of $1,200. Which of the following entries would be prepared to record the next payment of salaries on January, 2015 in the amount of $3,000?
A) $$\begin{array} { | c | r | r | } 
\hline \text { Salaries Expense } & 3,000 & \
\hline \text { Salaries Payable } & 1,200 & \
\hline \text { Cash } & & 4,200 \
\hline
\end{array}$$
B) $$\begin{array} { | c | r | r | } 
\hline \text { Salaries Payable } & 3,000 & \
\hline \text { Cash } & & 3,000 \
\hline
\end{array}$$
C) $$\begin{array} { | c | r | r | } 
\hline \text { Salaries Payable } & 1,200 & \
\hline \text { Cash } & & 1,200 \
\hline
\end{array}$$
D) $$\begin{array} { | c | r | r | } 
\hline \text { Salaries Expense } & 1,200 & \
\hline \text { Salaries Payable } & & 1,200 \
\hline
\end{array}$$
E) $$\begin{array} { | c | r | r | } 
\hline \text { Salaries Payable } & 1,200 & \
\hline \text { Salaries Expense } & 1,800 & \
\hline \text { Cash } & & \mathbf { 3 } , 000 \
\hline
\end{array}$$

Accepted Answer

The accrued salary expense of $1,200 from December needs to be reversed by debiting Salaries Payable. The remaining $1,800 of the $3,000 payment is recorded as Salaries Expense. Cash is credited for the total payment of $3,000.

Question 20

A company pays each of its two office employees each Friday at the rate of $100 per day each 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:
A) Debit Unpaid Salaries $600 and credit Salaries Payable $600
B) Debit Salaries Expense $400 and credit Salaries Payable $400
C) Debit Salaries Expense $600 and credit Salaries Payable $600
D) Debit Salaries Payable $400 and credit Salaries Expense $400
E) Debit Salaries Expense $400 and credit Cash $400

Accepted Answer

The answer of A company pays each of its two...

Quiz 3: Preparing Financial Statements

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

On April 30, 2014, a three-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 year ended December 31, 2014?

A company purchased a new truck at a cost of $42,000 on July 1, 2014. The truck is estimated to have a useful life of 6 years and a salvage value of $3,000. Using the straight- line method, how much depreciation expense will be recorded for the truck for the year ended December 31, 2014?

The adjusting entry to record the earned but unpaid salaries of employees at the end of an accounting period is:

A company recorded two days of accrued salaries of $1,400 for its employees on January 31. On February 9, it paid its employees for these accrued salaries and for other salaries earned through February 9. The January 31 and February 9 journal entries are:

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

On May 1, 2014, Giltus Advertising Company received $1,500 from Julie Bee for advertising services to be completed April 30, 2015. The cash receipt was recorded as unearned fees. At December 31, 2014, $500 of the fees had been earned. The adjusting entry on December 31, 2014, should include:

On December 31, the balance in the Prepaid Advertising account was $176,000, which is the remaining balance of a 12-month advertising campaign purchased on August 31 in the current year. Assuming the cost is spread equally over each month, how much did this advertising campaign cost in total?

On December 31, the balance in the Prepaid Insurance account was $4,500, which is the remaining balance of a 12-month policy purchased on October 31 in the current year. How much did this policy originally cost?

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

On January 1, Acme College received $1,200,000 in Unearned Tuition Revenue from its students for the spring semester, which spans four months beginning on January 2. What amount of tuition revenue should the college recognize on January 31?

Financial statements are typically prepared in the following order:

The adjusted trial balance contains information pertaining to:

If a company records prepayment of expenses in an asset account, the adjusting entry would:

On December 31, the balance in the Prepaid Subscription account was $648. This is the remaining balance of a 12-month subscription purchased on September 30 in the current year. How much did this subscription originally cost?

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?

A trial balance prepared after adjustments have been recorded is called a(n) :

An adjusting entry was made on December 31, 2014 to accrue a salary expense of $1,200. Which of the following entries would be prepared to record the next payment of salaries on January, 2015 in the amount of $3,000?