Question 1

If accrued salaries were recorded on December 31 with a credit to Salaries Payable,the entry to record payment of these wages on the following January 5 would include:

Accepted Answer

Since the accrued salaries were recorded on December 31 with a credit to Salaries Payable, it means the amount owed to employees was credited to Salaries Payable which is a liability account. Therefore, when the payment is made on January 5, the liability account would be debited because the company no longer owes that amount to its employees, and the cash account would be credited because cash has been disbursed. The entry would be a debit to Salaries Payable and a credit to Cash.

Question 2

On December 31,the balance in the Prepaid Advertising account was $176,000,which is the remaining balance of a 12-month advertising campaign purchased on August 31 in the current year.Assuming the cost is spread equally over each month,how much did this advertising campaign cost in total?

Accepted Answer

The advertising campaign was purchased on August 31 and the balance on December 31 was $176,000, which means that 4 months of advertising have already been used up (September, October, November, December). Therefore, there are 8 months remaining. If the cost is spread equally over each month, the monthly cost would be $176,000/4 = $44,000. So the total cost of the 12-month advertising campaign would be $44,000 x 12 = $528,000. However, since we are only interested in the cost up to December 31, we need to subtract the amount that has already been used up: $44,000 x 4 = $176,000. Therefore, the total cost of the advertising campaign is $528,000 - $176,000 = $352,000. This is closest to answer choice C, $264,000.

Question 3

Financial statements are typically prepared in the following order:

Accepted Answer

The income statement calculates net income for a given period, followed by the statement of retained earnings, which shows changes in retained earnings during that period. Finally, the balance sheet presents a snapshot of a company's financial position on a specific date, which includes its assets, liabilities, and equity. The order of financial statements reflects the logical flow of information in terms of calculating and presenting financial performance and position.

Question 4

A company purchased a new truck at a cost of $42,000 on July 1,2014.The truck is estimated to have a useful life of 6 years and a salvage value of $3,000.Using the straight- line method,how much depreciation expense will be recorded for the truck for the year ended December 31,2014?

Accepted Answer

The depreciation expense for the year ended December 31, 2014, is calculated as follows:Depreciation expense = (Cost of truck - Salvage value) / Useful life= ($42,000 - $3,000) / 6= $39,000 / 6= $6,500Therefore, the depreciation expense for the year ended December 31, 2014, is $6,500.

Question 5

On December 31,the balance in the Prepaid Subscription account was $648.This is the remaining balance of a 12-month subscription purchased on September 30 in the current year.How much did this subscription originally cost?

Accepted Answer

To find out how much the subscription originally cost, we need to figure out the total amount of the subscription, and then subtract the portion of it that has already been used.

The subscription is for 12 months, and it was purchased on September 30. From September 30 to December 31 (the end of the year), there are three months. So, the portion of the subscription that has already been used is:

3/12 = 1/4

That means that 1/4 of the subscription cost $648. To find out how much the entire subscription cost, we can set up a proportion:

1/4 = $648/x

Where x is the total cost of the subscription.

To solve for x, we can cross-multiply:

1x = 4($648)
x = $2,592

So the original cost of the subscription was $2,592. Therefore, the answer is D) $864.

Question 6

A trial balance prepared after adjustments have been recorded is called a(n):

Accepted Answer

An adjusted trial balance is prepared after adjusting entries have been recorded to ensure that the total debits still equal the total credits and that all financial information is accurate.

Question 7

An adjusting entry was made on December 31,2014 to accrue a salary expense of $1,200.Which of the following entries would be prepared to record the next payment of salaries on January,2015 in the amount of $3,000?

Accepted Answer

The answer of An adjusting entry was made on December...

Question 8

The adjusting entry to record the earned but unpaid salaries of employees at the end of an accounting period is:

Accepted Answer

The adjusting entry to record the earned but unpaid salaries of employees at the end of an accounting period is to debit Salaries Expense for the amount of the earned wages, and credit Salaries Payable to show the liability owed to employees. Therefore, the correct choice is D, Debit Salaries Expense and credit Salaries Payable.

Question 9

A company recorded two days of accrued salaries of $1,400 for its employees on January 31.On February 9,it paid its employees for these accrued salaries and for other salaries earned through February 9.The January 31 and February 9 journal entries are:

Accepted Answer

The answer of A company recorded two days of accrued...

Question 10

On December 31,the balance in the Prepaid Insurance account was $4,500,which is the remaining balance of a 12-month policy purchased on October 31 in the current year.How much did this policy originally cost?

Accepted Answer

Since the policy is for 12 months, and was purchased on October 31st, it means that it covers November and December of the current year, and would then cover January through October of the following year.

Therefore, the policy covers a total of 12 months, starting from November of the current year.

To find out how much the policy originally cost, we can divide the remaining balance ($4,500) by the number of months covered by the policy (10).

$4,500 ÷ 10 = $450/month

Then, to find the original cost of the policy, we can multiply the monthly cost by the total number of months (12):

$450/month x 12 months = $5,400

So, the original cost of the policy was $5,400.

Therefore, the best choice is A) $5,400.

Question 11

The adjusted trial balance contains information pertaining to:

Accepted Answer

The adjusted trial balance contains information pertaining to all general ledger accounts, including both balance sheet and income statement accounts.

Question 12

A company's Office Supplies account shows a beginning balance of $600 and an ending balance of $400.If office supplies expense for the year is $3,100,what amount of office supplies was purchased during the period?

Accepted Answer

Office supplies purchased during the period = office supplies expense - decrease in office supplies account
Decrease in office supplies account = beginning balance - ending balance
Decrease in office supplies account = $600 - $400 = $200
Office supplies purchased during the period = $3,100 - $200 = $2,900. Therefore, the answer is B.

Question 13

On January 1,Acme College received $1,200,000 in Unearned Tuition Revenue from its students for the spring semester,which spans four months beginning on January 2.What amount of tuition revenue should the college recognize on January 31?

Accepted Answer

The college should recognize revenue proportionally over the period the service is provided. Since the semester spans four months, the revenue recognized for one month (January) is $1,200,000 / 4 = $300,000.

Question 14

A company pays each of its two office employees each Friday at the rate of $100 per day each for a five-day week that begins on Monday.If the monthly accounting period ends on Tuesday and the employees worked on both Monday and Tuesday,the month-end adjusting entry to record the salaries earned but unpaid is:

Accepted Answer

The employees worked for two days (Monday and Tuesday) at $100 per day each, totaling $400. The adjusting entry records the salaries expense incurred but not yet paid.

Question 15

ABC Co.leased a portion of its store to another company for eight months beginning on October 1,2014,at a monthly rate of $800.This other company paid the entire $6,400 cash on October 1,which ABC Co.recorded as unearned revenue.The journal entry made by ABC Co.at year-end on December 31,2014,would include a:

Accepted Answer

At year-end on December 31, ABC Co. would need to recognize the portion of rent that has been earned. As the company leased a portion of its store for 8 months at a monthly rate of $800, the earned rent for the 3 months ending on December 31 would be $2,400 (3 months x $800/month). Therefore, the journal entry would include a credit to Unearned Rent for $2,400 (reducing the liability) and a debit to Rent Earned for $2,400 (recognizing the revenue). Option D is the only choice that reflects these entries. Option E is incorrect as it suggests that the entire $6,400 is still unearned, whereas a portion has already been earned by year-end. Option A and C do not reflect the recognition of revenue and liability related to the rent earned.

Question 16

On April 30,2014,a three-year insurance policy was purchased for $18,000 with coverage to begin immediately.What is the amount of insurance expense that would appear on the company's income statement for the year ended December 31,2014?

Accepted Answer

The insurance expense for the year ended December 31, 2014, is $4,000, which is 1/3 of the total premium of $18,000.

Question 17

The difference between the cost of an asset and the accumulated depreciation for that asset is called:

Accepted Answer

The cost of an asset minus the accumulated depreciation equals the book value of the asset. This represents the amount of the asset's value that has not yet been depreciated.

Question 18

On May 1,2014,Giltus Advertising Company received $1,500 from Julie Bee for advertising services to be completed April 30,2015.The cash receipt was recorded as unearned fees.At December 31,2014,$500 of the fees had been earned.The adjusting entry on December 31,2014,should include a:

Accepted Answer

The adjusting entry should debit Unearned Fees for $500 to decrease the liability and recognize the revenue that has been earned by crediting Earned Fees for the same amount.

Question 19

Expenses incurred but unpaid that are recorded during the adjusting process with a debit to an expense and a credit to a liability are:

Accepted Answer

The expenses incurred but unpaid that are recorded with a debit to an expense and a credit to a liability during the adjusting process are referred to as accrued expenses. This is because they are expenses that have been incurred but are yet to be paid or settled. Examples of accrued expenses include salaries and wages payable, interest payable, and utilities payable.

Question 20

If a company records prepayment of expenses in an asset account,the adjusting entry would:

Accepted Answer

When a company records prepayment of expenses in an asset account, it means that it has paid for an expense that will be used up in the future. The adjusting entry for this is to shift the cost from the asset account to the expense account that it corresponds to. This adjustment would typically result in a debit to the expense account and a credit to the asset account.

Quiz 3: Adjusting Accounts for Financial Statements