Question 1

A transaction has been recorded in the T-accounts of Powell Corporation as follows:   Which of the following reflects how this event affects the company's financial statements?

Accepted Answer

This transaction cannot be analyzed without additional information regarding the account names and the amounts involved. The given T-account entries do not provide any information about the impact of the transaction on the financial statements. Therefore, none of the options can be deemed correct.

Question 2

The employees of Able Company have worked the last two weeks of Year 1, but the employees' salaries have not been paid or recorded as of December 31, Year 1. The adjusting entry that Able should make to accrue these unpaid salaries on December 31, Year 1 is:

Accepted Answer

The adjusting entry that Able should make to accrue these unpaid salaries on December 31, Year 1 is a debit to Salaries Expense and a credit to Salaries Payable. This will recognize the expense in the current period and record the obligation to pay the employees in the future. Choice A is incorrect because a credit to cash would imply that the salaries have already been paid, which they have not. Choice C is incorrect because it is the reverse of the correct entry and would result in a decrease in expenses, which is not accurate. Choice D is incorrect because the salaries should be recognized as an expense in the period worked, regardless of when the employees will be paid. The adjusting entry to record the accrual of unpaid salaries on December 31, Year 1 would be a debit to Salaries Expense and a credit to Salaries Payable. This is because the company has incurred an expense (Salaries Expense) for the work performed by the employees, but has not yet paid them. The amount owed to the employees is recorded as a liability (Salaries Payable) until it is paid in the next period. Choice A is incorrect because there has been no cash payment yet. Choice C is incorrect because it is the opposite of the correct entry. Choice D is incorrect because an entry is needed to record the expense and liability.

Question 3

The Wagner Company acquired $500,000 cash from the issue of common stock. How would this transaction be recorded in the company's T-accounts?

Accepted Answer

The answer of The Wagner Company acquired $500,000 cash from...

Question 4

Why are adjusting entries recorded at the end of the accounting period?

Accepted Answer

Adjusting entries are recorded at the end of the accounting period to recognize unrecorded accruals and deferrals. This is necessary to ensure that the financial statements reflect the company's financial position and performance accurately. Without adjusting entries, revenues and expenses may not be recognized in the correct period, leading to errors in the financial statements. Adjusting entries are necessary to record transactions and events that have occurred during the current accounting period but have not yet been recorded. This includes accruals and deferrals, which are necessary to match revenues and expenses to the period in which they were earned or incurred. Adjusting entries help ensure that the financial statements accurately reflect the company's financial position and performance at the end of the accounting period.

Question 5

The following pre-closing accounts and balances were drawn from the records of Carolina Company on December 31, Year 1:  What is the amount of total assets that will be reported on the balance sheet as of December 31, Year 1?

Accepted Answer

The answer of The following pre-closing accounts and balances were...

Question 6

The Baker Company purchased $1,000 of supplies on account. How would this event be reflected in T-accounts?

Accepted Answer

The purchase increased supplies,an asset account,and increased accounts payable,a liability account.Therefore,$1,000 will appear as a debit on the left side of the supplies T-account and as a credit on the right side of the accounts payable T-account.

Question 7

If you debit an expense account, what impact does that have on stockholders' equity?

Accepted Answer

Debiting an expense account means that an expense has been incurred, which decreases the company's earnings or net income. Since stockholders' equity is calculated as the difference between a company's assets and liabilities, a decrease in net income leads to a decrease in stockholders' equity.

Question 8

On November 1, Year 1, Shumate Company paid $1,200 in advance for an insurance policy that covered the company for six months. Which of the following will be included in the adjustment required on December 31, Year 1?

Accepted Answer

The monthly insurance cost is $200 ($1,200 ÷ 6 months).By December 31,Year 1 the company had used the insurance coverage for two months.The Insurance Expense account must be increased with a debit for $400 ($200 × 2)and the Prepaid Insurance account must be decreased with a credit for the same amount.

Question 9

On August 1, Year 1, Benjamin and Associates collected $18,000 in advance for legal services to be rendered for one year. Which of the following entries reflect the end-of-the-year adjustment to reflect revenue earned?

Accepted Answer

The answer of On August 1, Year 1, Benjamin and...

Question 10

A transaction has been recorded in the T-accounts of Horowitz Corporation as follows:   Which of the following reflects how this event affects the company's financial statements?

Accepted Answer

In Option A, there is no effect on the financial statements as only one account has been debited. In Option C, both accounts have been credited, which is not possible since every transaction must have an equal credit and debit. In Option D, both accounts have been debited, which is also not possible. Therefore, Option B is the correct answer as it reflects that the transaction has increased the cash balance and decreased the accounts receivable balance, affecting the balance sheet.

Question 11

A transaction has been recorded in the T-accounts of Hough Company as follows:   Which of the following reflects how this event affects the company's financial statements?

Accepted Answer

The answer of A transaction has been recorded in the...

Question 12

Fitzpatrick Company had $500 of accrued salary expenses that will be paid during the following accounting period. How would the related adjusting entry be recorded in the company's T-accounts?

Accepted Answer

The answer of Fitzpatrick Company had $500 of accrued salary...

Question 13

During a company's first yearof operations, the asset account, Office Supplies, was debited for $3,900 for the purchases of supplies. At year-end, a physical count of the supplies on hand revealed that $1,625 of unused supplies were available for future use. How will the related adjusting entry affect the company's financial statements?

Accepted Answer

The adjusting entry will decrease the Office Supplies asset account by the amount of unused supplies, which is $1,625. This is because the company has already recorded the full purchase price of $3,900 as an asset, but only $1,625 worth of supplies were actually used in the first year.

At the same time, the unused supplies represent an expense that the company has incurred but not yet recorded. Therefore, an expense account (such as Supplies Expense or Office Expense) will need to be debited for $1,625 to recognize this expense.

Overall, these adjustments will result in a decrease of $1,625 to assets and an increase of $1,625 to expenses. This means that the correct answer is A, where expenses will increase, and assets will decrease by $2,275.

The adjustment will also affect the company's net income for the first year, as the additional expense will reduce the amount of profit that the company has made. However, the exact impact will depend on other factors such as revenues and other expenses, so we can't say exactly how the adjusting entry will affect net income without further information.

Question 14

A transaction has been recorded in the T-accounts of Simpson Company as follows:   Which of the following could be an explanation for this transaction?

Accepted Answer

The answer of A transaction has been recorded in the...

Question 15

A transaction has been recorded in the T-accounts of Vernon Company as follows:   Which of the following reflects how this event affects the company's financial statements?

Accepted Answer

The answer of A transaction has been recorded in the...

Question 16

On October 1, Year 1, Senegal Company paid $1,200 in advance for rent of office space for one year and recorded a journal entry debiting Prepaid Rent and crediting Cash for $1,200. On December 31, Year 1, the required adjusting entry was recorded. What are the adjusted account balances at December 31, Year 1?

Accepted Answer

Since the rent was prepaid for the entire year, at the end of December, 3 months of rent have already been used up (October, November, December). This means that the prepaid rent balance at December 31, Year 1 would be $900 ($1,200 - $300) and the rent expense for the year would be $300 ($1,200/12 x 3 months used). Therefore, the adjusted account balances at December 31, Year 1 are Prepaid Rent, $900 and Rent Expense, $300. Option D is the correct choice. The adjusting entry is necessary to recognize the portion of prepaid rent that has been used up, or in other words, that has expired. Since the rent was prepaid for one year, and three months have already passed (October, November, December), the amount that has expired is 3/12 or 1/4 of the total prepaid rent.

$1,200 x 1/4 = $300 (amount that has expired)

Therefore, the adjusted balances at December 31, Year 1 are:

Prepaid Rent: $1,200 - $300 = $900 
Rent Expense: $300

Question 17

A transaction has been recorded in the T-accounts of Gibbs Company as follows:   Which of the following could be an explanation for this transaction?

Accepted Answer

The answer of A transaction has been recorded in the...

Question 18

During a company's first year of operations, the asset account, Office Supplies, was debited for $2,300 for the purchases of supplies. At year-end, a physical count of the supplies on hand revealed that $825 of unused supplies were available for future use. How will the related adjusting entry affect the company's financial statements?

Accepted Answer

The adjusting entry will decrease the Office Supplies asset account by $1,475 (the difference between the initial $2,300 purchase and the $825 of unused supplies on hand). This will result in a decrease in total assets, but also an increase in the Office Supplies expense account, as the supplies that were purchased but not used during the year are now considered an expense. Therefore, the correct answer is that expenses will increase, and assets will decrease by $1,475. The $825 of unused supplies represent the amount that was consumed during the year, and the remaining $1,475 ($2,300 - $825) represents the amount that is still available for future use. To accurately reflect the expenses incurred during the year, an adjusting entry must be made to recognize the $1,475 in supplies that were consumed. This will decrease assets by $1,475 (to reflect the supplies that were used up) and increase expenses by $1,475. Therefore, option A is correct. Option B is incorrect because it implies that the full amount of supplies purchased ($2,300) represents an expense when in fact only the portion that was consumed should be expensed. Option C is also incorrect because it implies that the full amount of supplies purchased ($2,300) should be added to assets, which is incorrect. Option D is incorrect because the adjusting entry will affect net income (by increasing expenses) and the accounting equation (by decreasing assets and increasing expenses).

Question 19

The closing entry for the Dividends account would involve which of the following?

Accepted Answer

The dividends account has a normal debit balance, meaning it increases with debits and decreases with credits. Therefore, to close the dividends account at the end of the accounting period, a credit must be made to reduce the balance to zero. This credit will be made to Retained Earnings, as it represents a distribution of profits to shareholders. However, none of the other options involve a credit to dividends, making them incorrect choices. The closing entry for the Dividends account involves a credit to Dividends. This entry reduces the balance of the Dividends account to zero and transfers the amount of dividends paid to the Retained Earnings account. Therefore, the correct choice is option B, a credit to Dividends. There is no credit to Retained Earnings, Common Stock, or Cash involved in this closing entry.

Question 20

Bijan Corporation earned $4,000 of revenue that had been deferred. How would the related adjusting entry be recorded in the company's T-accounts?

Accepted Answer

The answer of Bijan Corporation earned $4,000 of revenue that...

Quiz 13: The Double-Entry Accounting System

A transaction has been recorded in the T-accounts of Powell Corporation as follows: Which of the following reflects how this event affects the company's financial statements?

The employees of Able Company have worked the last two weeks of Year 1, but the employees' salaries have not been paid or recorded as of December 31, Year 1. The adjusting entry that Able should make to accrue these unpaid salaries on December 31, Year 1 is:

The Wagner Company acquired $500,000 cash from the issue of common stock. How would this transaction be recorded in the company's T-accounts?

Why are adjusting entries recorded at the end of the accounting period?

The following pre-closing accounts and balances were drawn from the records of Carolina Company on December 31, Year 1: What is the amount of total assets that will be reported on the balance sheet as of December 31, Year 1?

The Baker Company purchased $1,000 of supplies on account. How would this event be reflected in T-accounts?

If you debit an expense account, what impact does that have on stockholders' equity?

On November 1, Year 1, Shumate Company paid $1,200 in advance for an insurance policy that covered the company for six months. Which of the following will be included in the adjustment required on December 31, Year 1?

On August 1, Year 1, Benjamin and Associates collected $18,000 in advance for legal services to be rendered for one year. Which of the following entries reflect the end-of-the-year adjustment to reflect revenue earned?

A transaction has been recorded in the T-accounts of Horowitz Corporation as follows: Which of the following reflects how this event affects the company's financial statements?

A transaction has been recorded in the T-accounts of Hough Company as follows: Which of the following reflects how this event affects the company's financial statements?

Fitzpatrick Company had $500 of accrued salary expenses that will be paid during the following accounting period. How would the related adjusting entry be recorded in the company's T-accounts?

A transaction has been recorded in the T-accounts of Simpson Company as follows: Which of the following could be an explanation for this transaction?

A transaction has been recorded in the T-accounts of Vernon Company as follows: Which of the following reflects how this event affects the company's financial statements?

A transaction has been recorded in the T-accounts of Gibbs Company as follows: Which of the following could be an explanation for this transaction?

The closing entry for the Dividends account would involve which of the following?

Bijan Corporation earned $4,000 of revenue that had been deferred. How would the related adjusting entry be recorded in the company's T-accounts?