Question 1

The entry to adjust for the cost of supplies used during the accounting period is
A)debit Supplies Expense; credit Supplies
B)debit Stockholders' Equity; credit Supplies
C)debit Accounts Payable; credit Supplies
D)debit Supplies; credit Stockholders' Equity

Accepted Answer

The cost of supplies used during the accounting period should be recorded as an expense in the Supplies Expense account, with a corresponding decrease in the Supplies asset account. Therefore, the correct entry is to debit Supplies Expense and credit Supplies.

Question 2

Accumulated Depreciation and Depreciation Expense are classified, respectively, as
A)expense, contra asset
B)asset, contra liability
C)revenue, asset
D)contra asset, expense

Accepted Answer

Accumulated Depreciation is a contra asset account, meaning it has a credit balance that offsets the related asset account on the balance sheet. Depreciation Expense, on the other hand, is an expense account on the income statement that represents the allocation of an asset's cost over its useful life. Therefore, the best choice is D – Accumulated Depreciation is classified as a contra asset, and Depreciation Expense is classified as an expense.

Question 3

The type of account and normal balance of Prepaid Insurance is
A)asset, credit
B)asset, debit
C)contra asset, credit
D)contra asset, debit

Accepted Answer

Prepaid Insurance is an asset account because it represents an advance payment for insurance coverage. The normal balance of an asset account is a debit, as it increases with debits and decreases with credits.

Question 4

The type of account and normal balance of Unearned Fees is
A)revenue, credit
B)expense, debit
C)liability, credit
D)liability, debit

Accepted Answer

Unearned Fees is a type of liability account, as it represents money that has been received from customers for services that have not yet been provided. The normal balance of a liability account is credit.

Question 5

Gracie, Inc. made a prepaid rent payment of $2,800 on January 1. The company's monthly rent is $700. The amount of prepaid rent that would appear on the January 31 balance sheet after adjustment is
A)$2,100
B)$700
C)$2,800
D)$1,400

Accepted Answer

The prepaid rent on January 31 would be $2,100 because $700 (one month's rent) would be expensed in January, leaving $2,100 ($2,800 - $700) as the remaining prepaid amount.

Question 6

As time passes, fixed assets other than land lose their capacity to provide useful services. To account for this decrease in usefulness, the cost of fixed assets is systematically allocated to expense through a process called
A)equipment allocation
B)depreciation
C)accumulation
D)matching

Accepted Answer

Depreciation is the systematic allocation of the cost of fixed assets over their useful lives. This matches the cost of the asset with the periods during which it provides benefits to the business, and recognizes that the asset's usefulness declines over time.

Question 7

Smokey Company purchases a one-year insurance policy on July 1 for $3,600. The adjusting entry on December 31 is
A)debit Insurance Expense, $1,800; credit Prepaid Insurance, $1,800
B)debit Insurance Expense, $1,500; credit Prepaid Insurance, $1,500
C)debit Insurance Expense, $2,100; credit Prepaid Insurance, $2,100
D)debit Prepaid Insurance, $1,800; credit Cash, $1,800

Accepted Answer

The adjusting entry on December 31 would be to debit Insurance Expense for the amount of insurance that has been used up (half a year's worth, or $1,800), and credit Prepaid Insurance for the remaining balance that still represents future coverage. Therefore, the correct choice is A.

Question 8

The balance in the office supplies account on January 1 was $7,000, supplies purchased during January were $3,000, and the supplies on hand at January 31 were $2,000. The amount to be used for the appropriate adjusting entry is
A)$4,300
B)$12,000
C)$5,000
D)$8,000

Accepted Answer

Amount to be used for the appropriate adjusting entry = Balance in the office supplies account on January 1 + Supplies purchased during January - Supplies on hand at January 31 = $7,000 + $3,000 - $2,000 = $8,000

Question 9

Accrued revenues would appear on the balance sheet as
A)assets
B)liabilities
C)common stock
D)prepaid expenses

Accepted Answer

Accrued revenues represent revenue that has been earned but not yet received or recorded. Therefore, they are assets that should be reported on the balance sheet.

Question 10

Prepaid advertising, representing payment for the next quarter, would be reported on the balance sheet as a(n)
A)asset
B)liability
C)contra asset
D)stockholders' equity

Accepted Answer

Prepaid advertising is considered an asset because it represents future economic benefits that the company will receive, in this case, advertising services that have been paid for in advance but not yet utilized.

Question 11

The adjusting entry to record the depreciation of a building for the fiscal period is
A)debit Depreciation Expense; credit Building.
B)debit Depreciation Expense; credit Accumulated Depreciation.
C)debit Accumulated Depreciation; credit Depreciation Expense.
D)debit Building; credit Depreciation Expense.

Accepted Answer

Depreciation is the process of allocating the cost of a tangible asset over its useful life, and is recorded as an expense on the income statement. The adjusting entry to record the depreciation of a building involves debiting Depreciation Expense and crediting Accumulated Depreciation, which is a contra asset account that shows the total depreciation taken against the asset to date. This entry reduces the value of the building on the balance sheet and reflects the portion of the building's cost that has been used up during the period.

Question 12

Supplies are recorded as assets when purchased. Therefore, the credit to Supplies in the adjusting entry is for the amount of supplies
A)still on hand
B)purchased
C)used
D)required for the next accounting period

Accepted Answer

The credit to Supplies in the adjusting entry reflects the amount of supplies used during the period, as the entry is made to adjust the supplies account from the total amount purchased to the remaining unused supplies, which are reported as assets.

Question 13

Buster Industries pays weekly salaries of $30,000 on Friday for a five-day week ending on that day. The adjusting entry necessary at the end of the fiscal period ending on Tuesday is
A)debit Salaries Payable, $12,000; credit Cash, $12,000
B)debit Salary Expense, $12,000; credit Dividends, $12,000
C)debit Salary Expense, $12,000; credit Salaries Payable, $12,000
D)debit Dividends, $12,000; credit Cash, $12,000

Accepted Answer

Since the end of the fiscal period is on a Tuesday and the salaries are paid on Friday, there are two days’ worth of salaries that have been earned but not yet paid. Therefore, an adjusting entry needs to be made to recognize this expense and ensure that the liability is properly recorded. Debiting Salary Expense and crediting Salaries Payable for $12,000 (2 days’ worth of salaries) will accomplish this. Choice A is incorrect because Cash is already recorded when the salaries are paid on Friday. Choice B is incorrect because Dividends are not related to salaries. Choice D is incorrect because Dividends do not affect the recording of salaries.

Question 14

The difference between the balance of a fixed asset account and the related accumulated depreciation account is termed
A)historical cost
B)contra asset
C)book value
D)market value

Accepted Answer

The difference between the balance of a fixed asset account and the related accumulated depreciation account is the book value of the fixed asset.

Question 15

The cost of office supplies to be used in future periods is ordinarily shown on the balance sheet as a(n)
A)stockholders' equity
B)asset
C)contra asset
D)liability

Accepted Answer

Office supplies are typically considered an asset because they have future economic value to the company. They are not a liability because they do not represent a future obligation to pay out money. They are also not a contra asset because they are not reducing the value of another asset.

Question 16

The entry to adjust the accounts for salaries accrued at the end of the accounting period is
A)debit Salaries Payable; credit Cash
B)debit Cash; credit Salaries Payable
C)debit Salaries Payable; credit Salaries Expense
D)debit Salaries Expense; credit Salaries Payable

Accepted Answer

Accrued salaries represent an expense that has been earned, but for which payment has not yet been made. To adjust the accounts, the expense should be debited and the liability should be credited, so the correct entry is to debit Salaries Expense and credit Salaries Payable. Therefore, the correct choice is D, "debit Salaries Expense; credit Salaries Payable".

Question 17

The supplies account had a balance of $4,400 at the beginning of the year and was debited during the year for $2,400, representing the total of supplies purchased during the year. If $400 of supplies are on hand at the end of the year, the supplies expense to be reported on the income statement for the year is
A)$400
B)$2,000
C)$6,800
D)$6,400

Accepted Answer

The answer of The supplies account had a balance of...

Question 18

Which of the following is an example of a prepaid expense?
A)Supplies
B)Accounts Receivable
C)Unearned Subscriptions
D)Unearned Fees

Accepted Answer

Prepaid expenses are costs that have been paid but not yet consumed. Supplies fit this definition because they are items that a company buys in advance of actually using them in its operations.

Question 19

Which of the following is the proper adjusting entry, based on a prepaid insurance account balance before adjustment of $14,000 and unexpired insurance of $3,000, for the fiscal year ending on April 30?
A)debit Insurance Expense, $3,000; credit Prepaid Insurance, $3,000
B)debit Insurance Expense, $14,000; credit Prepaid Insurance, $14,000
C)debit Prepaid Insurance, $11,000; credit Insurance Expense, $11,000
D)debit Insurance Expense, $11,000; credit Prepaid Insurance, $11,000

Accepted Answer

The adjusting entry should reduce the Prepaid Insurance account (asset) and increase the Insurance Expense account (expense). The amount to be adjusted is the difference between the balance of the Prepaid Insurance account before adjustment and the unexpired insurance as of the end of the fiscal year. Therefore, the proper adjusting entry is to debit Insurance Expense for $11,000 (the difference between $14,000 and $3,000) and credit Prepaid Insurance for the same amount. Choice D is the only option that correctly reflects this adjustment.

Question 20

Data for an adjusting entry described as "accrued wages, $2,020" requires a
A)debit to Wages Expense and a credit to Wages Payable
B)debit to Wages Payable and a credit to Wages Expense
C)debit to Accounts Receivable and a credit to Wages Expense
D)debit to Dividends and a credit to Wages Payable

Accepted Answer

Accrued wages means wages that have been earned but not yet paid. Therefore, we need to recognize the expense in the period in which it was earned (debit Wages Expense) and record the liability for the unpaid amount (credit Wages Payable).

Quiz 3: The Adjusting Process

The entry to adjust for the cost of supplies used during the accounting period is

Accumulated Depreciation and Depreciation Expense are classified, respectively, as

The type of account and normal balance of Prepaid Insurance is

The type of account and normal balance of Unearned Fees is

Gracie, Inc. made a prepaid rent payment of $2,800 on January 1. The company's monthly rent is $700. The amount of prepaid rent that would appear on the January 31 balance sheet after adjustment is

As time passes, fixed assets other than land lose their capacity to provide useful services. To account for this decrease in usefulness, the cost of fixed assets is systematically allocated to expense through a process called

Smokey Company purchases a one-year insurance policy on July 1 for $3,600. The adjusting entry on December 31 is

The balance in the office supplies account on January 1 was $7,000, supplies purchased during January were $3,000, and the supplies on hand at January 31 were $2,000. The amount to be used for the appropriate adjusting entry is

Accrued revenues would appear on the balance sheet as

Prepaid advertising, representing payment for the next quarter, would be reported on the balance sheet as a(n)

The adjusting entry to record the depreciation of a building for the fiscal period is

Supplies are recorded as assets when purchased. Therefore, the credit to Supplies in the adjusting entry is for the amount of supplies

Buster Industries pays weekly salaries of $30,000 on Friday for a five-day week ending on that day. The adjusting entry necessary at the end of the fiscal period ending on Tuesday is

The difference between the balance of a fixed asset account and the related accumulated depreciation account is termed

The cost of office supplies to be used in future periods is ordinarily shown on the balance sheet as a(n)

The entry to adjust the accounts for salaries accrued at the end of the accounting period is

Which of the following is an example of a prepaid expense?

Which of the following is the proper adjusting entry, based on a prepaid insurance account balance before adjustment of $14,000 and unexpired insurance of $3,000, for the fiscal year ending on April 30?

Data for an adjusting entry described as "accrued wages, $2,020" requires a