Question 1

Starlight Associates, Inc.recorded salary expense of $100,000 in 2016.However, additional salaries of $5,000 had been earned, but not paid or recorded at December 31, 2016.After the adjustments are recorded and posted at December 31, 2016, the balances in the Salaries Expense and Salaries Payable accounts will be: ​ $\begin{array}{lc}
\underline{\text { Salaries Expense }}& \underline{\text { Salaries Payable}} \
\text { a. } \$ 105,000 & \$ 5,000 \
\text { b. } \$ 100,000 & \$ 0 \
\text { c. } \$ 100,000 & \$ 5,000 \
\text { d. } \$ 105,000 & \$ 0
\end{array}$

Accepted Answer

The answer of Starlight Associates, Inc.recorded salary expense of $100,000...

Question 2

Adjustments are necessary only if

Accepted Answer

Adjustments are necessary when cash receipts and payments occur before or after the point in time when revenues and expenses should be recognized under the accrual basis of accounting. This ensures that the financial statements accurately reflect the financial position of the company. The other choices do not accurately describe the need for adjustments.

Question 3

Which one of the following adjustments will increase assets?

Accepted Answer

Recording rent revenue for amounts owed by a tenant but not yet paid will increase assets as it represents money owed to the company. The other options either do not affect assets or decrease them (accrued interest and depreciation). The use of supplies reduces the inventory asset.

Question 4

Stockton Co.received advance payments from customers during 2017 of $6,000.At December 31, 2016, $1,300 of the advance payments still had not been earned.After the adjustments are recorded and posted at December 31, 2016, what will the balances be in the Unearned Book Revenue and Book Revenue accounts? $\begin{array}{lc}
\underline{\text { Unearned Book Revenue }}& \underline{\text { Book Revenue}} \
\text { a. } \$ 1,300 & \$ 6,000 \
\text { b. } \$ 1,300 & \$ 4,700 \
\text { c. } \$ 6,000 & \$ 1,300 \
\text { d. None of these choices}
\end{array}$

Accepted Answer

The answer of Stockton Co.received advance payments from customers during...

Question 5

Windstar Corp.purchased supplies at a cost of $6,000 during the year.At December 31, supplies on hand are $1,400.Supplies expense for the year was $5,200.How much were supplies on hand at January 1?

Accepted Answer

To find the supplies on hand at January 1, we need to use the formula:
Supplies on hand at January 1 = Supplies purchased during the year + Supplies on hand at December 31 - Supplies expense for the year
Substituting the given values, we get:
Supplies on hand at January 1 = $6,000 + $1,400 - $5,200
Supplies on hand at January 1 = $1,200
Therefore, the correct choice is D) $600, which is half of $1,200.

Question 6

Vivo Co.received an 8-month, 9% note for $100,000 from its agent on October 1, 2016.The note is due on May 30, 2017.If Vivo accounting period ends on December 31, 2016, how much interest revenue should Vivo recognize during 2016 and 2017? ​ $\begin{array}{lr}
\frac{2016}{} & \underline{2017} \
\text { a. } \$ 3,750 & \$ 2,250 \
\text { b. } \$ 2,250 & \$ 3,750 \
\text { c. } \$ 9,000 & \$ 0 \
\text { d. } \$ 3,375 & \$ 5,625
\end{array}$

Accepted Answer

The answer of Vivo Co.received an 8-month, 9% note for...

Question 7

What effect does "recognizing revenue at the end of the accounting period for rent previously received in advance" have on the accounting equation for an insurance company?

Accepted Answer

When rent is received in advance, it is recorded as a liability (unearned revenue). Recognizing this revenue at the end of the accounting period decreases the liability (as the obligation to provide services is fulfilled) and increases stockholders' equity (as earned revenue increases net income, which is part of equity).

Question 8

Place Corp.purchased supplies at a cost of $12,000 during the year.At January 1, supplies on hand were $2,000.At December 31, supplies on hand are $1,000.Determine the amount of supplies expense for the year.

Accepted Answer

The supplies expense for the year can be calculated as follows:
Supplies expense = Supplies purchased during the year - Supplies on hand at the end of the year + Supplies on hand at the beginning of the year
Substituting the values given in the problem, we get:
Supplies expense = $12,000 - $1,000 + $2,000 = $13,000
Therefore, the correct choice is C.

Question 9

Gear Shop purchased supplies at a cost of $1,000 during the year.At January 1, the beginning balance in the supplies account was $300.At December 31, supplies on hand are $100.Determine supplies expense for the year.

Accepted Answer

Supplies expense for the year can be calculated as follows:
Beginning supplies balance = $300
Add: Supplies purchased during the year = $1,000
Total supplies available = $1,300
Less: Supplies on hand at the end of the year = $100
Supplies expense for the year = $1,300 - $100 = $1,200. Therefore, the correct answer is option B.

Question 10

Charlie Company had $1,800 of supplies on hand at January 1.During the year, supplies with a cost of $4,000 were purchased.At December 31, the actual supplies on hand amount to $1,300.After the adjustments are recorded and posted at December 31, determine the balances in the Supplies and Supplies Expense accounts. ​ $\begin{array}{lc}
\underline{\text { Supplies }}& \underline{\text { Supplies Expense}} \
\text { a. } \$ 1,800 & \$ 4,000 \
\text { b. } \$ 1,300 & \$ 4,500 \
\text { c. } \$ 5,300 & \$ 5,800 \
\text { d. } \$ 1,300 & \$ 5,800
\end{array}$

Accepted Answer

The answer of Charlie Company had $1,800 of supplies on...

Question 11

What happens to the accounting equation when the adjustment that recognizes accrued interest revenue is recorded?

Accepted Answer

The recognition of accrued interest revenue increases both the asset (accounts receivable) and stockholders' equity (interest revenue) accounts, resulting in an increase in both sides of the accounting equation.

Question 12

Frank Corporation purchased supplies at a cost of $15,000 during 2016.At January 1, 2016, supplies on hand were $2,000.At December 31, 2016, supplies on hand are $2,500.Calculate supplies expense for 2016.

Accepted Answer

To calculate supplies expense, we need to subtract the value of supplies on hand at the end of the year from the total value of supplies purchased during the year and add the value of supplies on hand at the beginning of the year:

Supplies expense = $15,000 (total supplies purchased) - $2,500 (supplies on hand at end of year) + $2,000 (supplies on hand at beginning of year) = $14,500

Therefore, the correct answer is B) $14,500.

Question 13

On December 1, 2016, Vonn Corporation paid $8,000 rent in advance.The rent per month is $1,000.If Hazel's accounting period ends on December 31, 2016, what will be reported on the financial statements?

Accepted Answer

Since Vonn Corporation paid $8,000 for rent in advance for 8 months, only $1,000 (one month's rent) would be recognized as an expense in December. The remaining $7,000 is considered a prepaid expense and would be reported as Prepaid Rent on the balance sheet at December 31, 2016.

Question 14

Cuisine Company received a 6-month, 6% note for $10,000 from its president on October 1, 2016.The note is due on March 31, 2017.If Cuisine's accounting period ends on December 31, how much interest revenue should Cuisine recognize during 2016 and 2017? ​ $\begin{array}{lr}
\underline{2016}& \underline{2017} \
\text { a. } \$ 450 & \$ 150 \
\text { b. } \$ 600 & \$ 0 \
\text { c. } \$ 300 & \$ 300 \
\text { d. } \$ 150 & \$ 150
\end{array}$

Accepted Answer

The answer of Cuisine Company received a 6-month, 6% note...

Question 15

Lucky Company purchased a truck at a cost of $12,000 in 2011.As of January 1, 2016, depreciation of $10,000 had been recorded on this asset.Depreciation expense for 2016 is $2,000.After the adjustments are recorded and posted at December 31, 2016, what is the carrying value of the truck?

Accepted Answer

The answer of Lucky Company purchased a truck at a...

Question 16

A company forgot to record four adjustments during 2016.Which one of the following omissions of adjustments will understate net income?

Accepted Answer

Not recording sales made during the last week of the period will understate net income because revenue is not recognized.

Question 17

Which one of the following is an example of an accrued liability?

Accepted Answer

An accrued liability is a expense that has been incurred but has not yet been paid. Wages earned by employees but not yet paid at the end of the period fits this definition. Option B refers to a capital asset, not a liability. Option C refers to a prepaid asset, not a liability. Option D refers to an expense that is consumed within the same period, not a liability.

Question 18

Lincoln Corp.received advance payments from customers during 2016 of $10,000.At December 31, 2016, $1,000 of the advance payments still had not been earned.After the adjustments are recorded and posted at December 31, 2016, the balances in the Unearned Service Revenue and Service Revenue accounts will be ​ $\begin{array}{lc}
\underline{\text { Unearned Service Revenue }}& \underline{\text { Service Revenue}} \
\text { a. } \$ 1,000 & \$ 9,000 \
\text { b. } \$ 1,000 & \$ 10,000 \
\text { c. } \$ 11,000 & \$ 1,000 \
\text { d. } \$ 9,000 & \$ 10,000
\end{array}$

Accepted Answer

The answer of Lincoln Corp.received advance payments from customers during...

Question 19

Vake purchased supplies at a cost of $18,000 during 2016.At January 1, 2016, the beginning balance in the supplies account was $1,000.For 2016, supplies expense was $16,000.How much "Supplies" are on hand as of December 31, 2016?

Accepted Answer

The total supplies available for use in 2016 would be the beginning balance plus the supplies purchased during the year, or $1,000 + $18,000 = $19,000. However, we also know that supplies expense for the year was $16,000, which means that $16,000 worth of supplies were used during the year. To find out how much is left on hand as of December 31, 2016, we subtract the supplies expense from the total supplies available: $19,000 - $16,000 = $3,000. Therefore, the answer is B) $3,000.

Question 20

What happens to the accounting equation when the adjustment for depreciation expense for the accounting period is recorded?

Accepted Answer

When the adjustment for depreciation expense is recorded, it reduces the value of the assets (usually a contra asset account like accumulated depreciation is credited) and reduces the value of the stockholders' equity (usually the income statement account like depreciation expense is debited). Therefore, the accounting equation will show a decrease in both assets and stockholders' equity.

Quiz 4: Income Measurement and Accrual Accounting