Question 1

Adjusting entries for accruals will never affect ________.
A)shareholders' equity
B)expenses
C)liabilities
D)cash

Accepted Answer

Adjusting entries for accruals do not affect cash since they reflect transactions that have been earned or incurred but have not yet been exchanged for cash. However, adjusting entries for accruals will affect shareholders' equity, expenses, and liabilities.

Question 2

Mariner,Inc.bought a lobster boat on November 1,2011 in exchange for a 2-month,6%,$80,000 note.The note plus interest will be repaid on January 1,2012,the maturity date.How much interest payable should the company report on its balance sheet at November 30,2011?
A)$0
B)$4,800
C)$400
D)$800

Accepted Answer

The interest payable accrued on November 30, 2011, would only cover one month of the note's two-month term. Therefore, the interest payable would be calculated as follows: $80,000 x 6% x 1/12 month = $400.  The correct answer is option C.

Question 3

Lumbers,Inc.lends $3,000 at 12% to an employee on September 1,2012.The employee agrees to pay the interest and principal in two years.Which of the following will be reported on Lumbers' year ended December 31,2012 financial statements?
A)The balance sheet will report Interest receivable of $120.
B)The income statement will report Interest revenue of $0.
C)The statement of cash flows will report Cash received for interest of $120.
D)The income statement will report Interest income of $360.

Accepted Answer

Interest for the period from September 1 to December 31, 2012, is accrued. The interest for 4 months is $3,000 * 12% * (4/12) = $120, which will be reported as interest receivable on the balance sheet.

Question 4

Mac,Inc.purchased a truck on October 1,2011 in exchange for a 12-month,9%,$100,000 note.What effect does the October 31,2011 adjusting entry for interest have on the company's total shareholders' equity?
A)increase
B)decrease
C)no effect

Accepted Answer

Recording interest expense decreases net income, which in turn reduces retained earnings and thus total shareholders' equity.

Question 5

On May 1,2012,Mink,Inc.borrowed $10,000 by issuing a 12%,3-month note and another $10,000 by issuing a 12%,6-month note.Interest expense for the month ended May 31,2012 equals ________.
A)$(400)on the income statement
B)$(200)on the income statement
C)$(300)on the income statement
D)$(2,400)on the income statement

Accepted Answer

Interest expense for one month is calculated by taking the annual interest rate, dividing it by 12 (for the number of months in a year), and then applying it to the principal amount. For both notes, the annual interest rate is 12%. Therefore, the monthly interest rate is 1% (12% / 12). For each $10,000 note, the monthly interest expense is $100 ($10,000 * 1%). Since there are two notes, the total interest expense for the month is $200 ($100 + $100).

Question 6

Slumbers,Inc.borrows $3,000 at 12% from a bank on September 1,2012 and agrees to pay the interest and principal in two years.What is the effect on the accounting equation of the adjusting entry to record interest for the year ended December 31,2012?
A)Assets will increase by $3,000.
B)Liabilities will decrease by $120.
C)Shareholders' equity will decrease by $120.
D)Cash will decrease by $120.

Accepted Answer

The interest for four months (September to December) at 12% annual interest on $3,000 is calculated as $3,000 * 12% * (4/12) = $120. Recording this interest expense will decrease shareholders' equity (through an increase in expenses) without affecting cash yet, as the interest is not paid until the loan matures.

Question 7

On May 1,2012,Mink,Inc.borrowed $10,000 by issuing a 12%,3-month note and another $10,000 by issuing a 12%,6-month note.Interest expense for the month ended May 31,2012 will be ________.
A)greater on the 3-month note than the 6-month note
B)greater on the 6-month note than the 3-month note
C)$200 for both notes combined
D)$0 for both notes because no interest was paid

Accepted Answer

Interest expense is calculated based on the principal amount, the interest rate, and the time period. For both notes, the interest for one month is calculated as follows: ($10,000 * 12% * 1/12) = $100 per note. Therefore, for both notes combined, the interest expense for May is $200. The duration of the notes does not affect the monthly interest expense calculation.

Question 8

How much interest will accrue over ten months on a $50,000,6% loan?
A)$3,000
B)$3,600
C)$300
D)$2,500

Accepted Answer

Interest on a loan is calculated using the formula I = PRT, where I is the interest, P is the principal amount ($50,000), R is the annual interest rate (6% or 0.06), and T is the time in years (10 months is approximately 0.833 years). Thus, I = $50,000 * 0.06 * 0.833 = $2,500.

Question 9

How much interest will accrue over three months on a $10,000,9% loan?
A)$300
B)$225
C)$900
D)$2,700

Accepted Answer

The interest for one year on a $10,000 loan at 9% would be $900 (calculated as $10,000 * 9% = $900). For three months, this would be a quarter of the annual interest, so $900 / 4 = $225.

Question 10

Mariner,Inc.bought a lobster boat on November 1,2011 in exchange for a 2-month,6%,$80,000 note.The note plus interest will be repaid on January 1,2012,the maturity date.How much interest payable should the company report on its balance sheet at December 31,2011?
A)$0
B)$4,800
C)$400
D)$800

Accepted Answer

The interest for two months is calculated as $80,000 * 6% * (2/12) = $800. Since one month has passed by December 31, 2011, the interest payable is $80,000 * 6% * (1/12) = $400. However, the full interest for the note is $800, which is the amount payable at maturity.

Question 11

Mac,Inc.purchased a truck on October 1,2011 in exchange for a 12-month,9%,$100,000 note.What effect does the October 31,2011 adjusting entry for interest have on the company's total assets?
A)increase
B)decrease
C)no effect

Accepted Answer

The adjusting entry for interest expense will increase interest payable and interest expense. Interest payable is a liability, so the total assets will not be affected.

Question 12

Salaries payable on the balance sheet most likely means that ________.
A)the company is in serious financial difficulty.It doesn't even have enough cash to pay its employees
B)the company's accountants are seriously confused.Salaries appear on the income statement,not on the balance sheet
C)employees did not receive payment for the last few days of work because the last day of the accounting period was not a payday
D)employees were overpaid and now owe the company money

Accepted Answer

Salaries payable on the balance sheet means that the company owes its employees money for the last few days of work, but the last day of the accounting period was not a payday yet. It does not necessarily indicate financial difficulty or confusion on the part of the accountants, nor does it imply that employees were overpaid and owe the company money.

Question 13

Mac,Inc.purchased a truck on October 1,2011 in exchange for a 12-month,9%,$100,000 note.What effect does the October 31,2011 adjusting entry for interest have on the company's total liabilities?
A)increase
B)decrease
C)no effect

Accepted Answer

The adjusting entry for interest will increase the company's total liabilities because it represents the portion of the note that has accrued as interest expense but has not yet been paid.

Question 14

Other receivables represents the amount ________.
A)customers owe for goods or services previously delivered
B)collected in advance of performing the services
C)lent to others
D)borrowed from others

Accepted Answer

Other receivables typically include amounts lent to others, which are expected to be repaid, rather than amounts owed by customers for goods or services (accounts receivable) or amounts collected in advance (unearned revenue).

Question 15

Slumbers,Inc.borrows $3,000 at 12% from a bank on September 1,2012 and agrees to pay the interest and principal in two years.Which of the following will be reported on the year ended December 31,2012 financial statements?
A)The balance sheet will report Interest payable of $120.
B)The income statement will report Interest expense of $0.
C)The statement of cash flows will report Cash paid for interest of $120.
D)The income statement will report Interest expense of $360.

Accepted Answer

DThe interest for 4 months (September to December) in 2012 at 12% annual interest on $3,000 is $120 (3,000 * 12% * 4/12). This amount is accrued and reported as Interest Payable on the balance sheet. Over the entire year, the interest expense is $360 (3,000 * 12%), which is reported on the income statement, reflecting the cost of borrowing for the year.

Question 16

Mariner,Inc.bought a lobster boat on November 1,2011 in exchange for a 2-month,6%,$80,000 note.The note plus interest will be repaid on January 1,2012,the maturity date.How much interest expense should the company report on its income statement for the month ended December 31,2011?
A)$0
B)$4,800
C)$400
D)$800

Accepted Answer

The interest expense for one month is calculated as: Interest = Principal x Rate x Time = $80,000 x 6% x (1/12) = $400.

Question 17

If a company has Other receivables on its balance sheet it most likely will show ________ on its income statement.
A)Interest revenue
B)Interest expense
C)Interest receivable
D)Interest payable

Accepted Answer

Other receivables are typically non-interest bearing and include items such as advances to employees or prepaid expenses. Therefore, the company would not show interest expense, interest receivable, or interest payable on its income statement. However, if the other receivables generate interest income, this would be shown on the income statement as interest revenue.

Question 18

Mariner,Inc.bought a lobster boat on November 1,2011 in exchange for a 2-month,6%,$80,000 note.The note plus interest will be repaid on January 1,2012,the maturity date.How much interest expense should the company report on its income statement for the month ended November 30,2011?
A)$0
B)$4,800
C)$400
D)$800

Accepted Answer

The company only had the note for one month (November), so the interest expense would be calculated as follows: $80,000 x 6% x 1/12 = $400. Therefore, the correct answer is C. Option A is incorrect because interest has accrued for one month, and Option B and Option D are overestimates of the interest expense.

Question 19

Which financial statement shows Cash paid to employees?
A)Income statement
B)Statement of changes in shareholders' equity
C)Statement of cash flows
D)Balance sheet

Accepted Answer

The answer of Which financial statement shows Cash paid to...

Question 20

The employees of Dew Drop Inn get paid every Friday for a 5-day workweek (Monday through Friday).The total payroll is $5,000 per day of work.If the accounting period ends on Thursday of a given week,what adjustment must be made to the company's accounting records?
A)Decrease Cash by $20,000 and decrease shareholders' equity by recognizing Salaries expense for the same amount.
B)Increase Salaries payable by $20,000 and increase shareholders' equity by recognizing Salaries expense for the same amount.
C)Increase Salaries payable by $20,000 and decrease shareholders' equity by recognizing Salaries expense for the same amount.
D)No adjustment is necessary because there is no expense until the employees are paid on Friday.

Accepted Answer

The answer of The employees of Dew Drop Inn get...

Quiz 3: Accruals and Deferrals: Timing Is Everything in Accounting

Adjusting entries for accruals will never affect ________.

Mariner,Inc.bought a lobster boat on November 1,2011 in exchange for a 2-month,6%,$80,000 note.The note plus interest will be repaid on January 1,2012,the maturity date.How much interest payable should the company report on its balance sheet at November 30,2011?

Lumbers,Inc.lends $3,000 at 12% to an employee on September 1,2012.The employee agrees to pay the interest and principal in two years.Which of the following will be reported on Lumbers' year ended December 31,2012 financial statements?

Mac,Inc.purchased a truck on October 1,2011 in exchange for a 12-month,9%,$100,000 note.What effect does the October 31,2011 adjusting entry for interest have on the company's total shareholders' equity?

On May 1,2012,Mink,Inc.borrowed $10,000 by issuing a 12%,3-month note and another $10,000 by issuing a 12%,6-month note.Interest expense for the month ended May 31,2012 equals ________.

Slumbers,Inc.borrows $3,000 at 12% from a bank on September 1,2012 and agrees to pay the interest and principal in two years.What is the effect on the accounting equation of the adjusting entry to record interest for the year ended December 31,2012?

On May 1,2012,Mink,Inc.borrowed $10,000 by issuing a 12%,3-month note and another $10,000 by issuing a 12%,6-month note.Interest expense for the month ended May 31,2012 will be ________.

How much interest will accrue over ten months on a $50,000,6% loan?

How much interest will accrue over three months on a $10,000,9% loan?

Mariner,Inc.bought a lobster boat on November 1,2011 in exchange for a 2-month,6%,$80,000 note.The note plus interest will be repaid on January 1,2012,the maturity date.How much interest payable should the company report on its balance sheet at December 31,2011?

Mac,Inc.purchased a truck on October 1,2011 in exchange for a 12-month,9%,$100,000 note.What effect does the October 31,2011 adjusting entry for interest have on the company's total assets?

Salaries payable on the balance sheet most likely means that ________.

Mac,Inc.purchased a truck on October 1,2011 in exchange for a 12-month,9%,$100,000 note.What effect does the October 31,2011 adjusting entry for interest have on the company's total liabilities?

Other receivables represents the amount ________.

Slumbers,Inc.borrows $3,000 at 12% from a bank on September 1,2012 and agrees to pay the interest and principal in two years.Which of the following will be reported on the year ended December 31,2012 financial statements?

Mariner,Inc.bought a lobster boat on November 1,2011 in exchange for a 2-month,6%,$80,000 note.The note plus interest will be repaid on January 1,2012,the maturity date.How much interest expense should the company report on its income statement for the month ended December 31,2011?

If a company has Other receivables on its balance sheet it most likely will show ________ on its income statement.

Mariner,Inc.bought a lobster boat on November 1,2011 in exchange for a 2-month,6%,$80,000 note.The note plus interest will be repaid on January 1,2012,the maturity date.How much interest expense should the company report on its income statement for the month ended November 30,2011?

Which financial statement shows Cash paid to employees?

The employees of Dew Drop Inn get paid every Friday for a 5-day workweek (Monday through Friday) .The total payroll is $5,000 per day of work.If the accounting period ends on Thursday of a given week,what adjustment must be made to the company's accounting records?