Question 1

adjusting entry required for an accrued expense consists of a debit to a liability and a credit to revenue.

Accepted Answer

An adjusting entry for an accrued expense consists of a debit to an expense account and a credit to a liability account, not revenue.

Question 2

adjusting entry required for unearned revenue consists of a debit to a liability and a credit to revenue.

Accepted Answer

When adjusting for unearned revenue, the entry decreases the liability account (by debiting it) because the company has fulfilled part of its obligation, and increases the revenue account (by crediting it) to recognize the revenue earned.

Question 3

adjusting entry required to accrue revenue consists of a debit to an expense and a credit to a liability.

Accepted Answer

Adjusting entry to accrue revenue consists of a debit to an asset (usually Accounts Receivable) and a credit to a revenue account, not an expense and a liability.

Question 4

Supplies account for Vulcan Detail Company had a balance of $3,200 at the beginning of the year. Additional supplies of $13,400 were purchased during the year. A physical count of the ending inventory of supplies revealed that $5,900 of supplies was still on hand. What was total Supplies expense for the year?
A) $16,400
B) $9,100
C) $10,700
D) $4,300

Accepted Answer

The answer of Supplies account for Vulcan Detail Company had...

Question 5

January 1, 2012, Office Manor's Unearned revenue account had a balance of $3,800. During the year, the company received $22,300 for services to be performed in the future. After adjusting entries were made, the balance in Unearned revenue on December 31, 2012 was $2,900.
Accounts receivable at the beginning of the year was $3,200. Billings for services performed on account were $31,200 during the year. After adjusting entries were made, the balance in Accounts receivable on December 31, 2012 was $1,000. No services were performed with immediate cash collection. What is the total Service revenue?
A) $56,600
B) $54,400
C) $55,700
D) $53,500

Accepted Answer

The total Service revenue can be calculated by adding the change in Unearned revenue to the cash received for future services, and the change in Accounts receivable to the billings for services performed on account. For Unearned revenue, the company started with $3,800, received $22,300, and ended with $2,900. The change (reduction) in Unearned revenue, which represents revenue recognized during the year, is $3,800 - $2,900 = $900. For Accounts receivable, the company started with $3,200, billed $31,200, and ended with $1,000. The change (reduction) in Accounts receivable, which represents cash collected, is $3,200 - $1,000 = $2,200. However, since no services were performed with immediate cash collection, the entire amount billed ($31,200) represents revenue recognized. Therefore, the total Service revenue is the sum of the change in Unearned revenue ($900), the cash received for future services ($22,300), and the billings for services performed on account ($31,200): $900 + $22,300 + $31,200 = $54,400.

Question 6

adjusting entry to record depreciation expense accomplishes which of the following?
A) Decreases a liability and increases an expense
B) Decreases a liability and increases a revenue
C) Increases an asset and increases an expense
D) Increases a contra-asset and increases an expense

Accepted Answer

Recording depreciation expense involves increasing the depreciation expense (which reduces net income) and increasing a contra-asset account (such as Accumulated Depreciation) which reduces the book value of the asset.

Question 7

adjusting entry to record supplies expense accomplishes which of the following?
A) Decreases an asset and increases an expense
B) Decreases a liability and increases a revenue
C) Increases an asset and increases an expense
D) Decreases a liability and increases an expense

Accepted Answer

Adjusting entries for supplies expense decrease the supplies asset account (since supplies have been used up) and increase the supplies expense account to reflect the cost of supplies used during the period.

Question 8

The adjusting entry to record unearned revenue that has now been earned accomplishes which of the following?
A) Increases an asset and increases an expense
B) Decreases an asset and increases an expense
C) Decreases a liability and increases a revenue
D) Decreases a liability and increases an expense

Accepted Answer

When unearned revenue, which is initially recorded as a liability, is earned, the adjusting entry decreases the liability account (unearned revenue) and increases a revenue account to reflect the revenue that has now been earned.

Question 9

The adjusting entry to record prepaid insurance that has now been used accomplishes which of the following?
A) Increases an asset and increases an expense
B) Decreases an asset and increases an expense
C) Decreases a liability and increases a revenue
D) Decreases a liability and increases an expense

Accepted Answer

The adjusting entry for prepaid insurance that has been used decreases the prepaid insurance asset account (since the insurance coverage period has passed, and it is no longer an asset) and increases the insurance expense account (reflecting the cost of insurance for the period).

Question 10

Plant assets are long-lived tangible assets used in the operation of a business. The allocation of a plant asset's cost to expense is which of the following?
A) The revenue principle
B) Revenue allocation
C) Depreciation
D) Historical cost

Accepted Answer

Depreciation is the process of allocating the cost of a plant asset over its useful life, reflecting the expense of using the asset in operations.

Question 11

Joy Company paid $4,500 for an 8-month lease on September 1, 2010. The adjusting entry would include a:
A) debit of $4,500 to rent expense on December 31, 2010.
B) credit of $4,500 to rent expense on December 31, 2010.
C) debit of $2,250 to rent expense on December 31, 2010.
D) credit of $2,250 to rent expense on December 31, 2010.

Accepted Answer

The lease covers 8 months, but only 4 months (September through December) have passed by December 31, 2010. The monthly rent is $4,500 / 8 = $562.50. For 4 months, the expense is $562.50 * 4 = $2,250. This amount should be debited to Rent Expense to recognize the expense incurred up to December 31, 2010.

Question 12

A company had $5,645 of supplies on hand on January 1. On December 31, a physical count showed $3,000 of supplies remained. The adjusting entry would require a:
A) debit to supplies expense of $3,000.
B) credit to supplies expense of $3,000.
C) debit to supplies expense of $2,645.
D) credit to supplies expense of $2,645.

Accepted Answer

The correct adjusting entry is to recognize the supplies used during the year. The company started with $5,645 and ended with $3,000, so $5,645 - $3,000 = $2,645 of supplies were used. This amount should be debited to Supplies Expense to recognize the expense.

Question 13

ABC Company signed a one-year $12,000 note at 8% interest on May 1, 2010. If the company paid the note in full on December 31, 2010, they would owe the bank $12,640. How much interest expense must be accrued on December 31, 2010?
A) $960
B) $320
C) $640
D) None of the above

Accepted Answer

The interest expense for the period from May 1, 2010, to December 31, 2010, is calculated as follows: $12,000 * 8% * (8/12) = $640. This is because the note was held for 8 months within the year, and the interest rate is annual.

Question 14

What type of account is Salary payable and what is its normal balance?
A) Expense, debit
B) Liability, credit
C) Asset, debit
D) Revenue, credit

Accepted Answer

Salary payable is a liability account because it represents an amount the company owes to its employees. The normal balance of any liability account, including Salary payable, is a credit.

Question 15

Which of the following is TRUE of plant asset accounts and their related accumulated depreciation accounts?
A) The allocation of a plant asset's cost to expense is called depreciation.
B) Accounting for plant assets is the same as accounting for a prepaid expense.
C) Accumulated depreciation is a contra-asset account which has a normal credit balance.
D) All of the above are true.

Accepted Answer

The answer of Which of the following is TRUE of...

Question 16

adjusted trial balance columns on a work sheet contain the account balances after the adjusting entries are made.

Accepted Answer

The adjusted trial balance columns on a work sheet indeed contain the account balances after adjusting entries have been made, reflecting the accounts' updated values.

Question 17

The accountant for Duman Legal Services failed to make an adjusting entry for supplies inventory that had been used for the year. Which of the following is true?
A) Total revenue is overstated.
B) Total revenue is understated.
C) Total expenses are overstated.
D) Total expenses are understated.

Accepted Answer

Failing to adjust for used supplies inventory means that the expense related to these supplies has not been recorded. This results in total expenses being reported as less than they actually are, hence they are understated.

Question 18

Which of the following accounts would most likely appear on the adjusted trial balance (have an account balance), but NOT appear on the unadjusted trial balance (account balance would be zero)?
A) Service revenue
B) Unearned revenue
C) Accumulated depreciation
D) Depreciation expense

Accepted Answer

Depreciation expense is typically recorded during the adjustment process to allocate the cost of tangible assets over their useful lives. It would not appear on the unadjusted trial balance since it's calculated and recorded as part of the adjusting entries at the end of the accounting period.

Question 19

financial statements should be prepared in this order: 1) income statement, 2) balance sheet, and 3) statement of owner's equity for a proprietorship.

Accepted Answer

The correct order is: 1) Income Statement, 2) Statement of Owner's Equity, and 3) Balance Sheet. The Statement of Owner's Equity is prepared after the Income Statement because it uses the net income (or loss) from the Income Statement to adjust the owner's capital account, and before the Balance Sheet because the updated capital account balance is reported on the Balance Sheet.

Question 20

owner's equity from the statement of owner's equity is included on the balance sheet for a proprietorship.

Accepted Answer

Owner's equity from the statement of owner's equity is included on the balance sheet for a proprietorship as it represents the owner's claim on the business assets after all liabilities have been deducted.

Quiz 3: The Adjusting Process

adjusting entry required for an accrued expense consists of a debit to a liability and a credit to revenue.

adjusting entry required for unearned revenue consists of a debit to a liability and a credit to revenue.

adjusting entry required to accrue revenue consists of a debit to an expense and a credit to a liability.

adjusting entry to record depreciation expense accomplishes which of the following?

adjusting entry to record supplies expense accomplishes which of the following?

The adjusting entry to record unearned revenue that has now been earned accomplishes which of the following?

The adjusting entry to record prepaid insurance that has now been used accomplishes which of the following?

Plant assets are long-lived tangible assets used in the operation of a business. The allocation of a plant asset's cost to expense is which of the following?

Joy Company paid $4,500 for an 8-month lease on September 1, 2010. The adjusting entry would include a:

A company had $5,645 of supplies on hand on January 1. On December 31, a physical count showed $3,000 of supplies remained. The adjusting entry would require a:

ABC Company signed a one-year $12,000 note at 8% interest on May 1, 2010. If the company paid the note in full on December 31, 2010, they would owe the bank $12,640. How much interest expense must be accrued on December 31, 2010?

What type of account is Salary payable and what is its normal balance?

Which of the following is TRUE of plant asset accounts and their related accumulated depreciation accounts?

adjusted trial balance columns on a work sheet contain the account balances after the adjusting entries are made.

The accountant for Duman Legal Services failed to make an adjusting entry for supplies inventory that had been used for the year. Which of the following is true?

Which of the following accounts would most likely appear on the adjusted trial balance (have an account balance) , but NOT appear on the unadjusted trial balance (account balance would be zero) ?

financial statements should be prepared in this order: 1) income statement, 2) balance sheet, and 3) statement of owner's equity for a proprietorship.

owner's equity from the statement of owner's equity is included on the balance sheet for a proprietorship.