Question 1

Which of the following would be the effect of a transaction to expense Supplies for the period?

Accepted Answer

Expensing supplies decreases the Supplies account and increases the Supplies Expense account.

Question 2

The expense created by allocating the cost of plant and equipment to the periods in which they are used, representing the expense of using the assets, is called:

Accepted Answer

Depreciation represents the expense of using an asset and is the process of allocating the cost of plant and equipment to the periods in which they are used.

Question 3

Before recording adjusting entries, the Office Supplies account had a $359 debitbalance while a physical count of the supplies showed $105 of unused supplies on hand. Thus, the required adjusting entry is:

Accepted Answer

The adjusting entry should reflect the amount of supplies used up, which is the difference between the initial balance ($359) and the unused supplies ($105), resulting in $254. Therefore, debit Office Supplies Expense $254 and credit Office Supplies $254.

Question 4

The 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 officesupplies was purchased during the year?

Accepted Answer

The answer of The Office Supplies account shows a beginning...

Question 5

On Oct. 1, 2017, Bianca Inc. signed a 1-year $75,000 note payable from Prime National Bank. The loan plus 4% interest is to be repaid on Sept. 30, 2018. Bianca's year-end is December 31. In its 2017 financial statements Bianca will record interest expense of:

Accepted Answer

The interest for the year 2017 is calculated for 3 months (October, November, December) at 4% annual interest on $75,000. The interest expense is $75,000 * 4% * (3/12) = $750.

Question 6

On May 1, 2015. Bee Advertising Company received $2,500 from Julie Cee for advertising services to be completed by April 30, 2016. Assume the receipt wasrecorded as unearned revenue and that at December 31, 2015, $1,000 of the fees had been earned. The adjusting entry prepared by Bee on December 31, 2015, shouldinclude:

Accepted Answer

The adjusting entry should recognize the earned revenue by debiting Unearned Revenue and crediting Revenue for the amount earned, which is $1,000.

Question 7

The purpose of depreciation is to

Accepted Answer

The purpose of depreciation is to allocate the cost of an asset to the periods in which it provides benefits to the company's operations. It is not intended to adjust the ledger account balances to market value or measure the change in an asset's value. While depreciation does recognize the reduced usefulness of an asset, this is not the primary purpose.

Question 8

An adjusting entry could be made for all of the following except

Accepted Answer

The adjusting entry for owner withdrawals is not necessary because it does not affect the company's financial statements. Owner withdrawals are recorded as a decrease in the owner's equity account (usually called "Owner's Draw" or "Drawings") and do not impact any other accounts. All of the other options listed require adjusting entries to accurately reflect the company's financial position and results.

Question 9

Which of the following assets is not depreciated? 113)

Accepted Answer

Land is not depreciated because it is considered a non-depleting asset with an indefinite useful life.

Question 10

The premium on a three-year insurance policy purchased on June 30, 2015, was$36,000. What is the amount of insurance expense that should be presented on the company's income statement for the year ended December 31, 2015?

Accepted Answer

The answer of The premium on a three-year insurance policy...

Question 11

On January 1, 2015, Peach Company purchased a five-year insurance policy for $5,000.If the cost was debited to Prepaid Insurance, the adjusting entry at the end of 2015 is:

Accepted Answer

The adjusting entry at the end of 2015 should adjust the prepaid insurance account balance to reflect the portion of the policy that has already been used up (expired) during the year. Therefore, the Prepaid Insurance account should be credited and the Insurance Expense account should be debited. The amount of the adjustment can be calculated as follows: $5,000 ÷ 5 years = $1,000 per year. Since one year has passed, only $1,000 of the prepaid insurance cost has been used up, hence the adjusting entry should be Debit Insurance Expense, $1,000, credit Prepaid Insurance $1,000.

Question 12

Lang leased a portion of its store to Pang for 12 months beginning on November 1, at a monthly rate of $400. Pang paid the entire $4,800 on November 1, which Langrecorded as unearned revenue. The journal entry made by Lang at year-end, December31, would include:

Accepted Answer

The $4,800 received from Pang at the beginning of the lease was recorded as unearned revenue, meaning it has not yet been earned by Lang. Since the lease was only for 12 months, and only one month has passed (November), Lang has only earned $400 of the total $4,800 received. Therefore, the journal entry at year-end would include a credit to Unearned Rent for $4,400 (to reduce the unearned revenue account to only the portion that has not yet been earned), and a debit to Rent Earned for $400 (to record the amount that has been earned during the month of December). This total debit of $400 to Rent Earned is what makes option D the correct choice. None of the other choices accurately reflect the situation described.

Question 13

On July 1, 2015, Nuby Trucking Company purchased a new truck for $52,000. Thetruck is estimated to have a useful life of six years and a residual value of $10,000. How much depreciation expense will be recorded for the truck during the year endedDecember 31, 2015?

Accepted Answer

The answer of On July 1, 2015, Nuby Trucking Company...

Question 14

Which of the following accounts is most likely associated with an accrued expense? 104)

Accepted Answer

Accrued expenses are expenses that have been incurred but not yet paid for. Salaries payable is an example of an accrued expense because employees have earned their wages but have not yet been paid.

Question 15

If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Services Revenue, the end-of-period adjusting entry to record the portion of these fees that has been earned is:

Accepted Answer

The adjusting entry involves debiting Unearned Legal Service Revenue to decrease the liability and crediting Legal Service Revenue to recognize the revenue earned during the period.

Question 16

For a prepaid expense, the adjusting entry would

Accepted Answer

A prepaid expense is an asset account, and the adjusting entry should decrease the asset account and increase the corresponding expense account. This is accomplished by debiting the expense account (to increase it) and crediting the asset account (to decrease it).

Question 17

A company paid the $1,350 premium on a three-year insurance policy on April 1, 2015.The policy gave protection beginning on that date. How many dollars of the premium will appear as an expense on the calendar year 2015 income statement assuming the accrual basis of accounting? Assuming the cash basis of accounting?

Accepted Answer

Under the accrual basis, only the portion of the premium that applies to the current year is expensed, which is $337.50 for 2015 (9 months of the year). Under the cash basis, the entire premium paid is expensed in the year it is paid, which is $1,350.

Question 18

On July 1, 2017, JazzE Ltd. purchased a 3-year insurance policy and paid a premium of$60,000. JazzE has a December 31 year end. Under accrual accounting, which of the following statements best describes the effect of this transaction?

Accepted Answer

The answer of On July 1, 2017, JazzE Ltd. purchased...

Question 19

Zang Company had no office supplies on hand at the beginning of the year. During the year, the company purchased $250 worth of office supplies. At the end of the year, $50 worth of office supplies were on hand. How much should Zang Company report asoffice supplies expense for the year?

Accepted Answer

The office supplies expense is calculated as the amount purchased minus the amount on hand at the end of the year: $250 - $50 = $200.

Question 20

Which of the following does not require an adjusting entry at year-end? 114)

Accepted Answer

Cash invested by the owner is not an expense or revenue item and therefore does not require an adjusting entry.

Quiz 3: Adjusting Accounts for Financial Statements