Question 1

On 15 September 2016,a surveyor received an advance of $7000 from a client for future services.The work was completed to the client's satisfaction on 10 October 2016.The surveyor uses accrual accounting.
-What is the journal entry made by the surveyor on 10 October 2016?

Accepted Answer

The journal entry on 10 October 2016 would reflect the completion of the services and the recognition of revenue earned. As the surveyor uses accrual accounting, revenue should be recognized when the service is performed, not when the cash is received. Therefore, the unearned revenue account (liability) should be decreased, and the surveying revenue account (revenue) should be increased, resulting in a journal entry of Dr Unearned revenue Cr Surveying revenue.

Question 2

Able Ltd operates on a five-day working week.Employees are paid on Thursday for work completed to Wednesday.The weekly wages bill is $40 000.If 30 June 2016 fell on a Tuesday,what was the accrued wages payable on 30 June 2016?

Accepted Answer

The answer of Able Ltd operates on a five-day working...

Question 3

Data Ltd uses accrual accounting and its financial year ends on 30 June.Expenses paid in advance are treated as assets.On 1 May 2016,Data Ltd pays $480 for a one-year fire insurance policy that expires on 30 April 2017.
-What is the journal entry made by Data Ltd on 30 June 2016?

Accepted Answer

The answer of Data Ltd uses accrual accounting and its...

Question 4

On 1 May 2016,A Ltd pays $9600 for a one-year fire insurance policy that expires on 30 April 2017.What is the journal entry made by A Ltd on 30 June 2016?

Accepted Answer

A Ltd pre-paid the one-year fire insurance policy on May 1, 2016, which means that $9600 was debited to the Prepaid insurance account. As of June 30, 2016, two months have passed since the policy was purchased, and the amount of insurance that has already been used up as an expense is $1600 (2/12 of $9600). Therefore, A Ltd should debit Insurance expense for $1600 and credit Prepaid insurance for $1600 to reflect the amount of insurance that has been used up during the period. So, the journal entry will be:

Dr Insurance expense $1600 
Cr Prepaid insurance $1600

Question 5

Data Ltd uses accrual accounting and its financial year ends on 30 June.Expenses paid in advance are treated as assets.On 1 May 2016,Data Ltd pays $480 for a one-year fire insurance policy that expires on 30 April 2017.
-Which of the following will appear on Data Ltd's balance sheet at 30 June 2016?

Accepted Answer

Prepaid insurance of $400 will appear on Data Ltd's balance sheet at 30 June 2016 because the insurance covers a period of 12 months from 1 May 2016 to 30 April 2017, and by 30 June 2016, only 2 months of the policy have been used ($480/12 months = $40 per month; $40 * 2 months = $80 used; $480 - $80 = $400 remaining as prepaid).

Question 6

On 1 May 2016,A Ltd pays $9600 for a one-year fire insurance policy that expires on 30 April 2017.Which of the following will appear on A Ltd's balance sheet at 30 June 2016?

Accepted Answer

The correct answer is B) Prepaid insurance $8000. This is because, by 30 June 2016, two months of the insurance policy have elapsed (May and June), leaving ten months of coverage. The cost of the insurance policy is $9600 for 12 months, so each month costs $800 ($9600/12 months). Therefore, for ten remaining months, the prepaid insurance amount is $8000 ($800 x 10 months).

Question 7

Which of the following statements about prepaid expenses is NOT true?

Accepted Answer

Prepaid expenses are expenses that have been paid in advance, not expenses that have been incurred during the current period but not yet paid. Option B incorrectly defines prepaid expenses.

Question 8

A business pays weekly salaries of $25 000 on Friday for a five-day week ending on that day.The adjusting entry necessary at the end of the financial period ending on Wednesday is:

Accepted Answer

The business pays weekly salaries on Friday for a five-day week ending on that day, which means that the salaries for Wednesday have not yet been included in the payment. Therefore, at the end of the financial period ending on Wednesday, an adjusting entry is necessary to record the salary expense for Wednesday and to accrue the amount as a liability in salaries payable. The correct entry is to debit Salary expense for $15,000 (the amount for Wednesday) and credit Salaries payable for $15,000. Therefore, choice B is the best answer.

Question 9

On 27 September 2016,a builder received an advance of $50 000 from a client for future work.The work was completed to the client's satisfaction on 3 December 2016.
-What is the journal entry made by the builder on 3 December 2016?

Accepted Answer

The journal entry made by the builder on December 3, 2016 will be to recognize the revenue earned from the completed work and to adjust the previously recorded unearned revenue. As the work has been completed to the client's satisfaction, the builder can now recognize the revenue as earned. The correct journal entry to record the earned revenue and adjust the unearned revenue would be to debit the Unearned revenue account and credit the Sales revenue account. Therefore, the correct choice is C which is Dr Unearned revenue Cr Sales revenue.

Question 10

T Ltd paid $240 000 in wages during the year.The opening balance of Accrued Wages was $8000 and the closing balance was $10 000.What was the wages expense for the year?

Accepted Answer

Wages expense for the year can be calculated by subtracting the opening balance of Accrued Wages from the sum of wages paid and the closing balance of Accrued Wages.

Wages expense = Wages paid + Closing Accrued Wages balance - Opening Accrued Wages balance 
Wages expense = $240 000 + $10 000 - $8 000 
Wages expense = $242 000

Therefore, the correct choice is C, $242 000.

Question 11

The weekly salaries bill for Credo Ltd is $70 000 for a five-day working week.Employees are paid on Friday for work completed to Thursday.If 30 June 2016 fell on a Wednesday,what would be the accrued salaries payable on 30 June 2016?

Accepted Answer

The answer of The weekly salaries bill for Credo Ltd...

Question 12

Which of the following entries records the receipt of cash for three months' rent? The cash was received in advance of providing the service.

Accepted Answer

The cash received in advance for rent is considered unearned revenue. Therefore, the appropriate journal entry would be to debit Cash and credit Unearned Revenue. This entry recognizes that while the payment was received, the service of providing rent has not yet been rendered. Therefore, the revenue cannot be recognized yet as Rent Revenue. Prepaid rent (Option C) would be used if the company paid rent in advance, and Rent Expense (Option D) would be used if the company paid rent for the current period.

Question 13

Brown Ltd has a $22 000 balance in its Unearned service revenue account.Where would this account appear in the financial statements?

Accepted Answer

The Unearned service revenue account represents revenue that has been received in advance but has not yet been earned. As such, it is a current liability and should appear in the balance sheet. Option A is incorrect as unearned revenue is not yet earned and cannot be recognized as revenue. Option B is incorrect as unearned revenue is not a current asset. Option D is incorrect as the unearned revenue account must appear in at least one of the financial statements.

Question 14

On 1 July 2015,Green Ltd had office supplies costing $20 000.During the year ended 30 June 2016,the company purchased supplies costing $32 000.Of these,$4000 worth was returned to the supplier as unsatisfactory.At 30 June 2016,it was ascertained that $7000 worth of the supplies remained unused.What was the value of Green Ltd's office supplies expense for year ended 30 June 2016?

Accepted Answer

The value of office supplies expense for the year ended 30 June 2016 can be calculated as follows:

Cost of supplies purchased during the year: $32 000
Less: Cost of unsatisfactory supplies returned: $4000
Equals: Cost of supplies available for use: $28 000
Less: Cost of supplies remaining unused: $7000
Equals: Cost of supplies consumed during the year: $21 000

Therefore, the value of Green Ltd's office supplies expense for the year ended 30 June 2016 was $41 000 (i.e. $20 000 + $21 000).

Question 15

A company had office supplies costing $50 at 1 July 2015.Purchases during the year amounted to $420 and a stocktake at 30 June 2016 disclosed supplies valued at $90.What is the amount to be debited to supplies expense account at 30 June 2016?

Accepted Answer

The amount to be debited to supplies expense account at 30 June 2016 can be found by calculating the cost of supplies used during the year. 
Cost of supplies used during the year = Beginning inventory + Purchases - Ending inventory
Beginning inventory = $50
Purchases = $420
Ending inventory = $90
Cost of supplies used during the year = $50 + $420 - $90 = $380
Therefore, the amount to be debited to supplies expense account at 30 June 2016 is $380, which is option B.

Question 16

On 15 September 2016,a surveyor received an advance of $7000 from a client for future services.The work was completed to the client's satisfaction on 10 October 2016.The surveyor uses accrual accounting.
-What is the journal entry made by the surveyor on 15 September 2016?

Accepted Answer

The answer of On 15 September 2016,a surveyor received an...

Question 17

H Ltd pays salaries each Friday afternoon to cover the previous five working days (up to and including Friday).The weekly wages' bill is $500 000.The end of the accounting period falls on a Monday.The adjusting journal entry will be:

Accepted Answer

Since the end of the accounting period falls on a Monday, there will be two days (Saturday and Sunday) for which wages have been earned but not yet paid. Therefore, the adjusting journal entry will be to accrue $100,000 in wages expense and accrued wages. This means debiting Wages expense for $100,000 and crediting Accrued wages for $100,000.

Question 18

On 27 September 2016,a builder received an advance of $50 000 from a client for future work.The work was completed to the client's satisfaction on 3 December 2016.
-What is the journal entry made by the builder on 27 September 2016?

Accepted Answer

The answer of On 27 September 2016,a builder received an...

Question 19

At the end of the financial year,the usual adjusting entry for accrued salaries owed to employees was omitted.Which of the following statements is true?

Accepted Answer

Omitting the adjusting entry for accrued salaries results in not recording an expense that was incurred but not yet paid. This means the salary expense for the year is understated, which in turn overstates the net profit. Since net profit is a component of retained earnings, which is part of shareholders' equity, shareholders' equity is overstated.

Question 20

The Supplies account has a balance of $975 at the beginning of the year and was debited during the year for $2800,representing the total of supplies purchased during the year.If $750 of supplies are on hand at the end of the year,the supplies expense to be reported on the profit and loss statement for the year is:

Accepted Answer

The supplies expense can be calculated as follows:

Beginning balance + Purchases - End balance = Supplies expense 
$975 + $2800 - $750 = $3025

Therefore, the supplies expense to be reported on the profit and loss statement for the year is $3025, which is option D.

Quiz 5: Accrual Accounting Adjustments

On 15 September 2016,a surveyor received an advance of $7000 from a client for future services.The work was completed to the client's satisfaction on 10 October 2016.The surveyor uses accrual accounting. -What is the journal entry made by the surveyor on 10 October 2016?