Question 1

The following items appeared on a company's December 31 work sheet for the current period.Based on the following information,what is net income for the current period?

Accepted Answer

The answer of The following items appeared on a company's...

Question 2

Under the alternative method for accounting for unearned revenues,which of the following pairs of journal entry formats is correct?
$$\begin{array} { | c | c } 
\hline \text { Initial Entry } & \text { Adjusting Entry } \
\hline
\end{array}$$
A.
$\begin{array}{|c|c|}
\hline \text { Cash } & \text { Unearned Consulting Revenue } \
\hline \text { Unearned Consulting Revenue } & \text { Consulting Revenue }\
\hline
\end{array}$
B.
$\begin{array}{|c|c|}
\hline \text { Cash } & \text { Consulting Revenue } \
\hline \text { Consulting Revenue } & \text { Unearned Revenue }\
\hline
\end{array}$
C.
$\begin{array}{|c|c|}
\hline\text { Cash } & \text { Unearned Revenue } \
\hline \text { Unearned Revenue } & \text { Cash }\
\hline
\end{array}$
D.
$\begin{array}{|c|c|}
\hline \text { Consulting Revenue } & \text { Unearned Revenue } \
\hline \text { Cash } & \text { Consulting Revenue }\
\hline 
\end{array}$
E.
$\begin{array}{|c|c|}
\hline\text { Cash } & \text { Consulting Revenue } \
\hline \text { Unearned Revenue } & \text { Unearned Revenue }\
\hline
\end{array}$

Accepted Answer

The alternative method for accounting for unearned revenues requires two journal entries. The first entry records the cash received as a debit to cash and a credit to unearned revenue. The second entry is made at the end of the period to recognize the earned revenue. It debits unearned revenue and credits revenue. Option B correctly reflects this process. Option A only has one entry, Option C and D have incorrect accounts used, and Option E has incorrect amounts used.

Question 3

Which of the following statements is true?

Accepted Answer

A post-closing trial balance includes only permanent accounts because temporary accounts are closed at the end of the accounting period. Retained earnings are not closed each accounting period but are adjusted through the statement of retained earnings. Information on the work sheet can be used to prepare financial statements, but the financial statements must be prepared separately. Adjusting entries on a work sheet must be posted to the ledger accounts. Closing entries are necessary at the end of each accounting period to transfer the balances of temporary accounts to the permanent equity accounts, regardless of whether there were errors.

Question 4

Under the alternative method for recording prepaid expenses,which is the correct set of journal entries?
$$\begin{array} { | c | c| } 
\hline \text { Initial Entry } & \text { Adjusting Entry } \
\hline
\end{array}$$
A.
$\begin{array}{|c|c|}
\hline\text { Insurance Expense } & \text { Prepaid Insurance } \
\hline \text { Cash } & \text { Insurance Expense }\
\hline
\end{array}$
B.
$\begin{array}{|c|c|}
\hline\text { Cash } & \text { Prepaid Insurance } \
\hline \text { Insurance Expense } & \text { Insurance Expense }\
\hline
\end{array}$
C.
$\begin{array}{|l|c|}
\hline \text { Prepaid Expense } & \text { Prepaid Insurance } \
\hline \text { Cash } & \text { Insurance Expense }\
\hline 
\end{array}$
D.
$\begin{array}{|l|c|}
\hline \text { Prepaid Expense } & \text { Insurance Expense } \
\hline \text { Cash } & \text { Prepaid Insurance }\
\hline
\end{array}$
E.
$\begin{array}{|l|c|}
\hline \text { Prepaid Expense } & \text { Cash } \
\hline \text { Insurance Expense } & \text { Prepaid Insurance }\
\hline
\end{array}$

Accepted Answer

Under the alternative method for recording prepaid expenses, the initial entry records the asset (Prepaid Insurance) and the cash paid. The adjusting entry records the expense (Insurance Expense) and reduces the asset (Prepaid Insurance).

Question 5

Shown below are a company's ledger accounts and their end-of-period balances before closing entries are posted.What amount will be posted to Retained Earnings in the process of closing the Income Summary account? (Assume all accounts have normal balances.)
$\begin{array}{|l|r|}
\hline \text { Retained earnings } & \$ 14,000 \
\hline \text { Dividends } & 19,200 \
\hline \text { Sales Revenue } & 58,000 \
\hline \text { Rent expense } & 7,200 \
\hline \text { Salaries expense } & 14,400 \
\hline \text { Insurance expense } & 840 \
\hline \text { Depr. Expense - equipment } & 900 \
\hline \text { Accum depr. - equipment } & 2,500\
\hline
\end{array}$

Accepted Answer

The answer of Shown below are a company's ledger accounts...

Question 6

Which of the following errors would cause the Balance Sheet columns of a work sheet to be out of balance?

Accepted Answer

The answer of Which of the following errors would cause...

Question 7

If the Balance Sheet columns of a work sheet fail to balance when the amount of the net income is added to the Balance Sheet Credit column,the cause could be:

Accepted Answer

An expense amount entered in the Balance Sheet Credit column would cause the Balance Sheet columns to fail to balance when the amount of the net income is added to the Balance Sheet Credit column. This is because expenses are normally entered in the Balance Sheet Debit column, and adding an expense to the Balance Sheet Credit column would increase the total of the Balance Sheet Credit column and cause it to be out of balance with the Balance Sheet Debit column.

Question 8

Which of the following statements is incorrect?

Accepted Answer

On the work sheet, the adjusted amounts are sorted into columns according to whether the accounts are used in preparing the income statement or the balance sheet, not the unadjusted or adjusted trial balance.

Question 9

A company shows a $600 balance in Prepaid Insurance in the Unadjusted Trial Balance columns of the work sheet.The Adjustments columns show expired insurance of $200.This adjusting entry results in:

Accepted Answer

The adjusting entry for expired insurance reduces the balance of prepaid insurance by $200, resulting in a new balance of $400 ($600 - $200). Since an expense (insurance expense) is being recognized for $200, this will lower the net income by $200. Choice A reflects this correctly.

Question 10

A trial balance prepared after the closing entries have been journalized and posted is the:

Accepted Answer

The post-closing trial balance is prepared after the closing entries have been journalized and posted. It lists all the accounts and their balances after the closing entries have been made, and only includes permanent accounts (assets, liabilities, and equity). This trial balance is used to ensure that the total debits still equal the total credits, and to serve as a starting point for the next accounting period. The other options listed (unadjusted trial balance, general ledger, adjusted trial balance, and worksheet) are prepared at different stages throughout the accounting cycle.

Question 11

Accumulated Depreciation,Accounts Receivable and Service Fees Earned would be sorted to which respective columns in completing a work sheet?

Accepted Answer

Accumulated Depreciation is a contra asset account and appears on the Balance Sheet as a credit. Accounts Receivable is an asset and appears on the Balance Sheet as a debit. Service Fees Earned is a revenue account and appears on the Income Statement as a credit.

Question 12

The alternative method of accounting for prepayments

Accepted Answer

The answer of The alternative method of accounting for prepayments
...

Question 13

A post-closing trial balance is prepared

Accepted Answer

A post-closing trial balance is prepared immediately after all closing entries have been recorded and posted to verify that the accounts have been correctly closed and to ensure that the accounting equation (assets = liabilities + equity) remains in balance.

Question 14

An error is indicated if the following account has a balance appearing on the post-closing trial balance:

Accepted Answer

Depreciation Expense-Office Equipment should not have a balance on the post-closing trial balance as it is a temporary account that should have been closed out at the end of the accounting period. All other accounts listed are permanent accounts and should have balances appearing on the post-closing trial balance.

Question 15

A 10-column spreadsheet used to draft a company's unadjusted trial balance,adjusting entries,adjusted trial balance and financial statements and which is an optional tool in the accounting process is a(n):

Accepted Answer

A 10-column spreadsheet used to draft a company's unadjusted trial balance, adjusting entries, adjusted trial balance, and financial statements is a worksheet. It is an optional tool in the accounting process that helps in organizing data and making adjustments before finalization of financial statements. The other options such as adjusted trial balance, post-closing trial balance, unadjusted trial balance, and general ledger are different accounting concepts and not related to the 10-column spreadsheet used as a worksheet.

Question 16

A post-closing trial balance includes:

Accepted Answer

The answer of A post-closing trial balance includes:
...

Question 17

The Unadjusted Trial Balance columns of a company's work sheet show the balance in the Office Supplies account as $750.The Adjustments columns show that $425 of these supplies were used during the period.The amount shown as Office Supplies in the Balance Sheet columns of the work sheet is:

Accepted Answer

The amount shown as Office Supplies in the Balance Sheet columns would be $325 debit, calculated as the original balance of $750 minus the $425 of supplies used during the period. This reflects the remaining value of office supplies.

Question 18

Statements that show the effects of proposed transactions as if the transactions had already occurred are called:

Accepted Answer

Pro forma statements show the effects of proposed transactions as if they had already occurred, and are commonly used in forecasting and to evaluate potential transactions. Professional, simplified, temporary, and interim statements do not necessarily refer to statements that show the effects of proposed transactions.

Question 19

When preparing a work sheet an adjusted trial balance amount is mistakenly sorted to the wrong work sheet column.The Balance Sheet columns will balance on completing the work sheet but with the wrong net income,if the amount sorted in error is:

Accepted Answer

The answer of When preparing a work sheet an adjusted...

Question 20

A company's ledger accounts and their end-of-period balances before closing entries are posted are shown below.What amount will be posted to Retained Earnings in the process of closing the Income Summary account? (Assume all accounts have normal balances.)
$\begin{array}{|l|r|}
\hline \text { Retained earnings } & \$ 7,000 \
\hline \text { Dividends } & 9,600 \
\hline \text { Revenue } & 29,000 \
\hline \text { Rent expense } & 3,600 \
\hline \text { Salaries expense } & 7,200 \
\hline \text { Insurance expense } & 920 \
\hline \text { Depr. Expense - equipment } & 500 \
\hline \text { Accum depr. - equipment } & 1,500\
\hline
\end{array}$

Accepted Answer

The Income Summary account is closed to Retained Earnings by debiting Retained Earnings for the amount of the net income and crediting Income Summary for the same amount. The net income is calculated as the difference between the total revenues and the total expenses. In this case, the total revenues are $29,000 and the total expenses are $12,220 ($3,600 + $7,200 + $920 + $500). Therefore, the net income is $16,780 ($29,000 - $12,220).

Quiz 3: Adjusting Accounts and Preparing Financial Statements