Question 1

Which of the following will occur if an adjusting entry to record an unrecorded receivable is NOT made?

Accepted Answer

If an adjusting entry for an unrecorded receivable is not made, both revenues and assets will be understated because the revenue earned has not been recorded, and the corresponding asset (receivable) is also not recorded.

Question 2

On October 1, Mathis Company entered into a six-month contract with Lewis Company to provide custodial services on a daily basis. The terms of the contract state that the cost will be $3,000 per month and Mathis will bill Lewis at the end of every two months. If Mathis is a calendar year company, what is the appropriate adjusting entry at December 31?

Accepted Answer

The adjusting entry at December 31 is to record the accrued revenue for the services provided in December. Since Mathis bills Lewis at the end of every two months, the revenue for December has not yet been billed or recorded. The adjusting entry will increase the Accounts Receivable balance by $3,000 and increase the Service Revenue balance by $3,000.

Question 3

Bay Graphics pays its employees each Friday for a five-day total workweek. The payroll is $9,000 per week. If the end of the accounting period occurs on a Wednesday, what is the adjusting entry to record wages payable?

Accepted Answer

The adjusting entry should recognize the salary expense incurred from Monday to Wednesday, which is 3/5 of the weekly payroll: $ \frac{3}{5} \times 9,000 = 5,400 $.

Question 4

An adjusting entry to record the expired portion of a prepaid expense that was originally debited to a prepaid expense account always includes

Accepted Answer

When a prepaid expense is adjusted for the portion that has been used up or expired, the entry includes a debit to an expense account and a credit to a prepaid expense account. This is because the prepaid expense account represents an asset that has been consumed or used up over time, and needs to be recognized as an expense in the income statement. Therefore, options A and B are incorrect, and option D is also incorrect as it suggests a credit to an expense account, which is not accurate.

Question 5

Which of the following types of accounts will always be debited to adjust for an unrecorded liability?

Accepted Answer

Expenses are accounts that reflect decreases in assets or increases in liabilities from ongoing operations to generate revenue. Adjusting for an unrecorded liability requires an increase in liabilities, and therefore an increase in expenses to account for the expense that was incurred. Therefore, an expense account will always be debited to adjust for an unrecorded liability.

Question 6

For which of the following types of adjusting entries is there no original entry?

Accepted Answer

Unrecorded liabilities do not have an original entry because they are not recorded until the adjusting entry is made at the end of the accounting period.

Question 7

If rent revenue of $5,000 is earned in 2012 but will NOT be received until 2013, what is the appropriate adjusting entry at December 31, 2013?

Accepted Answer

The adjusting entry should recognize the revenue earned in 2012 by debiting Rent Receivable and crediting Rent Revenue.

Question 8

Prepaid expense accounts are usually classified as

Accepted Answer

Prepaid expenses represent payments made in advance for goods or services that will be received in the future. These expenses are considered assets because they provide future economic benefits to the organization.

Question 9

Which of the following types of accounts will always be credited when a prepaid expense account is adjusted?

Accepted Answer

Prepaid expenses are assets that have been paid for but not yet used or consumed. Adjusting the prepaid expense account involves decreasing the asset account and increasing an expense account, resulting in a credit to the asset account and a debit to an expense account. Therefore, the asset account will always be credited.

Question 10

Revenue items that are earned but have NOT been collected or recognized are called

Accepted Answer

Unrecorded receivables refer to revenues that have been earned but not yet recorded or collected.

Question 11

An expired asset is called a(n)

Accepted Answer

An expired asset is considered an expense because it represents a cost that has been incurred and used up in the process of generating revenue.

Question 12

Which of the following will occur if an adjusting entry to record an accrued but unrecorded liability is NOT made?

Accepted Answer

If an adjusting entry for an accrued but unrecorded liability is not made, both expenses and liabilities will be understated because the expense has been incurred but not recorded, and the corresponding liability has not been recognized.

Question 13

On October 1, Doe Hunting Supplies, a calendar-year company, sold inventory that cost $60,000 for $100,000. The customer signed a six-month, 10 percent note in payment. On December 31, Woods should

Accepted Answer

The interest for three months (October to December) on the note is $2,500 (calculated as $100,000 * 10% * 3/12). This amount should be recorded as interest receivable.

Question 14

What is the effect on account balances when an adjusting entry to record an unrecorded receivable is made?

Accepted Answer

When an adjusting entry is made to record an unrecorded receivable, both revenues and assets will be increased. This is because the receivable represents money owed to the company, which is an asset, and the recording of the receivable also increases revenues.

Question 15

An adjusting entry to record an unrecorded liability usually includes a credit to

Accepted Answer

An unrecorded liability means that the liability has not been entered into the accounting system. Therefore, to record it, we need to credit the liability account to reflect the increase in the amount owed. The other options (B, C, and D) do not reflect an increase in a liability and thus are not appropriate for recording an unrecorded liability.

Question 16

If on December 31, 2012, interest expense of $600 is owed on a bank note that will NOT be paid until July 2013, what is the appropriate adjusting entry at the end of 2012?

Accepted Answer

Interest expense is recognized when incurred, regardless of when it is paid. The adjusting entry at the end of 2012 is to recognize the interest expense and the related interest payable.

Question 17

Bay Graphics pays its employees each Friday for a five-day total workweek. The payroll is $9,000 per week. If the end of the accounting period occurs on a Wednesday, the adjusting entry to record wages payable would include a

Accepted Answer

The answer of Bay Graphics pays its employees each Friday...

Question 18

The failure to adjust a prepaid expense that has partially expired and was originally recorded by debiting a prepaid expense for the entire amount will usually result in an

Accepted Answer

When a prepaid expense is not adjusted for the portion that has expired, the asset account (prepaid expense) remains overstated because it still includes the expired portion. Simultaneously, the expense account is understated because the expired portion has not been recognized as an expense.

Question 19

Boudin Corporation, a calendar-year company, obtained a $15,000, one-year, 10 percent bank loan on October 31 of the current year. Interest is payable at the end of the loan term. The adjusting entry needed on December 31 is

Accepted Answer

The interest for two months (November and December) is accrued: $15,000 x 10% x (2/12) = $250. Thus, debit Interest Expense $250 and credit Interest Payable $250.

Question 20

Unrecognized interest expense on a note is an example of a(n)

Accepted Answer

Unrecognized interest expense on a note means that the company has borrowed money and has not recorded the interest expense that it owes on the loan. This is an example of an unrecorded liability, as the company still owes the interest expense even though it has not recorded it in its financial statements. Options A and B are not relevant in this case, and option D is not applicable as it refers to an asset that has been paid for in advance.

Quiz 4: Completing the Accounting Cycle