Question 1

Surveying Company, Inc. purchased supplies during the year totaling $25,500. If the adjusted trail balance shows an ending balance in the Supplies account of $18,600, what was the amount of supplies used by Surveying Company?

Accepted Answer

The amount of supplies used is calculated by subtracting the ending balance from the total purchased: $25,500 - $18,600 = $6,900.

Question 2

A company purchased medical equipment for $100,000 on January 1, 2009. The company determined that the yearly depreciation expense is $10,000. At December 31, 2012, the book value of the asset is:

Accepted Answer

To calculate the book value of the asset at December 31, 2012, we need to subtract the accumulated depreciation from the original cost of the asset.
Depreciation for four years= $10,000 * 4 = $40,000
Book value= Cost - Accumulated Depreciation
Book value= $100,000 - $40,000
Book value= $60,000
Therefore, the book value of the asset at December 31, 2012, is $60,000.

Question 3

A company purchased supplies during the year totaling $10,000. At the end of the year, they made an adjusting entry to record $3,000 of supplies that had been used during the year. The ending balance in the Supplies account after the adjustment was $12,000. The beginning balance in the Supplies account was:

Accepted Answer

The ending balance in the Supplies account after the adjustment was $12,000, which is the sum of the beginning balance plus the supplies purchased during the year, minus the supplies used during the year. Therefore, $12,000 = beginning balance + $10,000 - $3,000. Solving for the beginning balance, we get $5,000.

Question 4

The adjustment for an accrued revenue:

Accepted Answer

The adjustment for an accrued revenue is necessary because a business often earns revenue before they receive the cash. This adjustment records revenue that has been earned but has not yet been received in cash or recorded in the records.

Question 5

On December 31 of the current year, Prepaid Rent was debited $5,400 for three months of rent, paid in advance. The amount of the adjusting entry on December 31 is:

Accepted Answer

Since the rent was prepaid for three months starting on December 31, no rent expense has been incurred by that date, so no adjusting entry is needed.

Question 6

A construction company purchased a new bulldozer for $90,000 on January 1, 2011. The company estimates that the bulldozer will have a useful life of nine years and then be worthless. Using the straight-line depreciation method, yearly depreciation expense will be:

Accepted Answer

Using the straight-line depreciation method, we divide the cost of the asset by its useful life.

$90,000 / 9 years = $10,000 per year depreciation expense

Question 7

On October 1, Blues Company paid $12,000 for one year of insurance, in advance. Which of the following will be part of the adjusting entry on December 31?

Accepted Answer

By December 31, three months of the insurance have been used, so the expense for these months should be recognized. $12,000 for one year means $1,000 per month. For three months, the expense is $3,000, so Insurance Expense is debited for $3,000.

Question 8

Which of the following is NOT true regarding the adjusting process?

Accepted Answer

Adjustments are made at the end of the accounting period, usually at the end of the month or year.

Question 9

On August 1 of the current year, Jamie Simmons received $5,400 for legal services to be performed evenly throughout the next six months. The adjusting entry on December 31 of the current year would include a:

Accepted Answer

By December 31, five months of services have been performed (August to December), so $4,500 ($5,400/6 months * 5 months) should be recognized as earned revenue, resulting in a credit to Service Revenue.

Question 10

The book value of an asset at the beginning of the year was $17,000. The equipment originally cost $27,000. Depreciation expense for the year was $8,000. The book value of the asset at the end of the year is:

Accepted Answer

The book value at the end of the year is calculated by subtracting the depreciation expense from the book value at the beginning of the year: $17,000 - $8,000 = $9,000.

Question 11

The adjusting entry to record the accrual of income tax expense includes a:

Accepted Answer

The adjusting entry for accrued income tax expense involves a credit to income tax payable to recognize the liability that the company owes but has not yet paid.

Question 12

On October 1 of the current year, a company received $4,800 for services to be performed evenly over the next four months. If no adjusting entry was made on December 31 of the current year:

Accepted Answer

If no adjusting entry is made, the revenue earned will be understated by $3,600 ($4,800/4 months x 3 months). This means that net income will be understated by the same amount. Therefore, the correct option is B, net income would be understated by $3,600.

Question 13

The adjustment for an accrued expense:

Accepted Answer

An adjustment for an accrued expense increases the expense account (reflecting the cost incurred) and increases the liability account (indicating the obligation to pay in the future).

Question 14

In the preparation of the adjusted trial balance:

Accepted Answer

The purpose of the adjusted trial balance is to list the final account balances after adjusting entries have been made. The trial balance data comes from the ledger, not the journal. Four columns are typically used for making adjusting entries, but these entries will have already been made before preparing the adjusted trial balance. The debits must always equal the credits in the adjusted trial balance, just like in the regular trial balance.

Question 15

A company purchased medical equipment for $100,000 on January 1, 2009. The company determined that the yearly depreciation expense is $10,000. What will be the ending balance in the Accumulated Depreciation - Medical Equipment at December 31, 2012?

Accepted Answer

The ending balance in the Accumulated Depreciation - Medical Equipment at December 31, 2012 will be $40,000. This is because the company has depreciated the equipment by $10,000 per year for the past four years, resulting in a total depreciation expense of $40,000.

Question 16

On November 1, Phillips Tool and Die Company paid six months' insurance in advance totaling $9,000. An adjusted trial balance prepared on December 31 would include a balance in the Prepaid Insurance account of:

Accepted Answer

Since the payment was made for six months in advance, only three months would have elapsed by December 31. Therefore, the amount that would have been used up by December 31 is $3,000 (half of the amount paid). The remaining $6,000 represents the amount of prepaid insurance expense that hasn't been used up yet, and it would be included in the Prepaid Insurance account on the adjusted trial balance.

Question 17

A company started the year with $400 of supplies. During the year the company purchased additional supplies costing $1,600. There were $800 of supplies on hand at the end of the year. An adjusted trial balance prepared at the end of the accounting period will show the following balance in Supplies Expense:

Accepted Answer

The balance in Supplies Expense can be calculated as follows:
Beginning Supplies + Purchases during the year - Ending Supplies = Supplies Expense
$400 + $1,600 - $800 = $1,200 
Therefore, the adjusted trial balance will show a balance of $1,200 in Supplies Expense.

Question 18

On August 1 of the current year, Jamie Simmons received $5,400 for legal services to be performed evenly throughout the next six months. An adjusted trial balance prepared on December 31 of the current year will show a credit balance in Unearned Revenue in the amount of:

Accepted Answer

Since the legal services were to be performed evenly throughout the next six months, as of December 31 (4 months after receiving payment), Jamie Simmons would have only earned half of the revenue received. Therefore, the revenue earned would be $2,700, and the remaining $2,700 would still be considered unearned revenue, resulting in a credit balance of $900 in the Unearned Revenue account.

Question 19

The debit to the Unearned Revenue account represents the:

Accepted Answer

The answer of The debit to the Unearned Revenue account...

Question 20

A company started the year with $400 of supplies. During the year, the company purchased an additional $1,200 of supplies. There were $700 of supplies on hand at the end of the year. An adjusting entry prepared at the end of the accounting period includes a:

Accepted Answer

The adjusting entry at the end of the year should reflect the amount of supplies that were actually used up during the year. To calculate the amount of supplies used, we need to subtract the amount of supplies on hand at the end of the year from the total amount of supplies available (i.e., the beginning balance plus purchases).

Total supplies available = Beginning balance + Purchases
Total supplies available = $400 + $1,200
Total supplies available = $1,600

Supplies used = Total supplies available - Supplies on hand
Supplies used = $1,600 - $700
Supplies used = $900

Therefore, the adjusting entry should debit Supplies Expense for $900 (to reflect the supplies that were used up) and credit Supplies for $900 (to reduce the balance of the supplies account to the correct ending balance of $700).

Quiz 3: Accrual Accounting Income