Question 1

An adjusting journal entry that includes an increase to a contra-asset account would include an increase in a(n):

Accepted Answer

An adjusting journal entry that includes an increase to a contra-asset account (which is used to reduce the value of an asset) typically involves an increase in an expense account. This is because the adjustment usually reflects the consumption of an asset's value, such as through depreciation or amortization, which is recorded as an expense.

Question 2

When the future benefits of existing assets are used up in the ordinary course of business:

Accepted Answer

When the future benefits of existing assets are used up in the ordinary course of business, an expense is recorded in order to reflect the decrease in the economic value of the asset. This is in accordance with the matching principle of accounting, which requires expenses to be recognized in the same period in which the related revenue is recognized.

Question 3

A company has an asset account,Prepaid Utilities,with a balance of $3,750 at the beginning of the month.The company used $980 of utilities during the month.Which of the following statements is true?

Accepted Answer

The use of prepaid utilities is an expense, which decreases net income and subsequently reduces retained earnings and shareholders' equity.

Question 4

Purrfect Pets had $6,000 of supplies at the end of October.During November,the company bought $2,000 of supplies.At the end of November,the company had $1,000 of supplies remaining.Which of the following statements is not true?

Accepted Answer

6000 + 2000 - 1,000 = 7000 supplies used.

Question 5

During the month,a company uses up $4,000 of supplies.At the end of the month,the related adjusting journal entry would result in:

Accepted Answer

The usage of supplies represents an expense for the company, and as such, the adjusting journal entry would result in a decrease in the Supplies asset account (debit) and an increase in the Supplies Expense account (credit). Option A is incorrect because there is no increase in liabilities related to the supplies usage. Option B is incorrect because there is no decrease in shareholders' equity related to the supplies usage. Option D is incorrect because there is no loss related to the supplies usage.

Question 6

The company uses up $5,000 of the book value of an existing asset.The company adjusts its accounts accordingly.Which of the following is a true statement?

Accepted Answer

This is a deferral adjustment because the company is decreasing the book value (an asset account) by $5,000 after it has been used up. This means that the asset was not fully utilized in the previous accounting period and needs to be adjusted accordingly.

Question 7

On December 31,a decision is made to accrue an expense and report a current liability.How many accounts will be included in this journal entry?

Accepted Answer

To accrue an expense and report a current liability, two accounts are typically included in the journal entry: an expense account to recognize the expense and a liability account to record the obligation to pay the expense in the future. Additionally, depending on the specific transaction, a third account may be included such as a prepaid expense account if the payment was made in advance. Therefore, the answer is (C) Two.

Question 8

One major difference between deferral and accrual adjustments is:

Accepted Answer

In accrual adjustments, both accounts involved are either increased or decreased, reflecting the recognition of revenues or expenses that have been incurred but not yet recorded. In deferral adjustments, one account is increased while the other is decreased, reflecting the postponement of revenue or expense recognition.

Question 9

Declared dividends:

Accepted Answer

Declared dividends are a way to distribute a company's profits to its shareholders. They are not an expense of doing business, and they are not recorded as a liability until the dividends are actually paid. While companies may choose to declare dividends, they are not legally obligated to do so.

Question 10

A company has a loan that accrues interest at a rate of $20 a day.The company pays the interest once a quarter.Which of these would be an accurate adjustment for a month in which no payments are made?

Accepted Answer

Since no interest payments were made in the current month, interest expense would still need to be recorded, but it would accrue and be recorded as a liability in Interest Payable. This means that we need to debit Interest Expense and credit Interest Payable to accurately reflect the interest expense for the month.

Question 11

A company makes a deferral adjustment that reduces a liability.This must mean:

Accepted Answer

A deferral adjustment that reduces a liability typically means that revenue is being recognized, thus increasing a revenue account.

Question 12

At the end of the month,the adjusting journal entry to record the use of supplies would include:

Accepted Answer

The correct adjusting journal entry to record the use of supplies involves a credit to the Supplies account (to decrease the asset as supplies are used) and a debit to the Supplies Expense account (to increase the expense, reflecting the cost of supplies used during the period).

Question 13

Accumulated Depreciation:

Accepted Answer

Accumulated Depreciation is a contra-asset account which represents the total amount of depreciation expense that has been charged to the asset over its useful life. It is deducted from the original cost of the asset to arrive at its net book value.

Question 14

Purrfect Pets had income before income tax of $164,000 last quarter and a 34% tax rate.Its net income should be reported as:

Accepted Answer

To calculate the net income, we need to subtract the income tax from the income before income tax:

Income before income tax = $164,000

Income tax = 34% of $164,000 = $55,760

Net income = Income before income tax - Income tax = $164,000 - $55,760 = $108,240

Therefore, the correct answer is B) $108,240.

Question 15

Which of the following is not the value at which an asset is reported on a financial statement?

Accepted Answer

The depreciated value is not typically used to report an asset on a financial statement. It is the amount by which an asset's value has decreased over time due to depreciation. The carrying value, book value, and net book value are all commonly used to report asset values on financial statements.

Question 16

Which of these accounts would normally not be affected by an adjustment?

Accepted Answer

Cash is a balance sheet account and is not affected by the adjustments made in the income statement accounts such as supplies, revenues, and expenses.

Question 17

One major difference between deferral and accrual adjustments is:

Accepted Answer

Deferral adjustments involve transactions that have already been recorded, but need to be deferred to a later period. Accrual adjustments, on the other hand, involve new transactions that have not yet been recorded, but need to be accounted for in the current period.

Question 18

A company owes rent at a rate of $6,000 per month.The company pays the rent owed on the tenth of each month for the previous month.At the end of each month,what kind of adjustment is required?

Accepted Answer

The company accrues the rent expense at the end of each month because it owes rent for the previous month. Therefore, an accrual adjustment is required to record the rent expense for the month in which it was incurred.

Question 19

Accrual adjustments link:

Accepted Answer

Accrual adjustments link assets and revenues moving in the same direction or liabilities and expenses moving in the same direction.

Question 20

To calculate the company's income tax expense for the current period,it is necessary to know:

Accepted Answer

To calculate the company's income tax expense for the current period, it is necessary to know the company's income before income taxes and the company's tax rate. This information is used to calculate the actual tax liability for the current period. Prior periods' information, operating expenses, and revenue do not directly factor into the calculation of the current period's income tax expense.

Quiz 4: Adjustments, financial Statements, and Financial Results

An adjusting journal entry that includes an increase to a contra-asset account would include an increase in a(n) :

When the future benefits of existing assets are used up in the ordinary course of business:

A company has an asset account,Prepaid Utilities,with a balance of $3,750 at the beginning of the month.The company used $980 of utilities during the month.Which of the following statements is true?

Purrfect Pets had $6,000 of supplies at the end of October.During November,the company bought $2,000 of supplies.At the end of November,the company had $1,000 of supplies remaining.Which of the following statements is not true?

During the month,a company uses up $4,000 of supplies.At the end of the month,the related adjusting journal entry would result in:

The company uses up $5,000 of the book value of an existing asset.The company adjusts its accounts accordingly.Which of the following is a true statement?

On December 31,a decision is made to accrue an expense and report a current liability.How many accounts will be included in this journal entry?

One major difference between deferral and accrual adjustments is:

Declared dividends:

A company has a loan that accrues interest at a rate of $20 a day.The company pays the interest once a quarter.Which of these would be an accurate adjustment for a month in which no payments are made?

A company makes a deferral adjustment that reduces a liability.This must mean:

At the end of the month,the adjusting journal entry to record the use of supplies would include:

Accumulated Depreciation:

Purrfect Pets had income before income tax of $164,000 last quarter and a 34% tax rate.Its net income should be reported as:

Which of the following is not the value at which an asset is reported on a financial statement?

Which of these accounts would normally not be affected by an adjustment?

One major difference between deferral and accrual adjustments is:

A company owes rent at a rate of $6,000 per month.The company pays the rent owed on the tenth of each month for the previous month.At the end of each month,what kind of adjustment is required?

Accrual adjustments link:

To calculate the company's income tax expense for the current period,it is necessary to know: