Question 1

The accountant for Rose's Emporium, Inc. prepared the following trial balance at January 31, 2010, after one month of operations:

Additional information items:
a. Consulting services rendered to a client in January, not yet billed or recorded, $2,400.
b. Portion of insurance expiring in January, $300.
c. Income taxes expense for January of $2,500.
d. The office equipment has a life of 5 years.
Instructions: Prepare adjusting entries for a through d.

Accepted Answer

The answer of The accountant for Rose's Emporium, Inc. prepared...

Question 2

$900 is owed to employees for work since the last payday in January, to be paid the first week of February. What is the effect on January net income if the accountant fails to make any January 31 adjustment for this item?

Accepted Answer

The answer of $900 is owed to employees for work...

Question 3

At January 31, the amount of supplies on hand is $2,300. What amount is shown on the January income statement for supplies expense?

Accepted Answer

The amount of supplies on hand at the end of January is not relevant to the supplies expense shown on the January income statement. To determine the supplies expense, we need to know how much supplies were purchased during January and how much was used up (i.e. consumed) during January. Therefore, we cannot choose A or D. Option B is also incorrect because it does not take into account the beginning balance of supplies, which is not given. The correct answer is C because it is the only option that makes sense without more information. We can assume the supplies expense is equal to the total amount of supplies purchased during January ($3,100) since there is no information about how much supplies were consumed.

Question 4

At January 31, the amount of supplies still on hand was determined to be $675. What amount should be reported in the January income statement for supplies expense? $__________

Accepted Answer

The answer of At January 31, the amount of supplies...

Question 5

Before any month-end adjustments are made, the net income of Lawrence Company is $550,000. However, the following adjustments are necessary: office supplies used, $35,000; services performed for clients but not yet recorded or collected, $12,300; interest accrued on note payable to bank, $14,100. After adjusting entries are made for the items listed above, Lawrence Company's net income would be:

Accepted Answer

Net income before adjustments = $550,000
Adjustments:
- Office supplies used = $35,000 (expense)
- Services performed but not yet recorded or collected = $12,300 (revenue)
- Interest accrued on note payable to bank = $14,100 (expense)

Adjusted net income = $550,000 - $35,000 + $12,300 - $14,100 
= $513,200

Question 6

Before month-end adjustments are made, the January 31 trial balance of Rover Excursions contains revenue of $27,900 and expenses of $17,340. Adjustments are necessary for the following items: 
$\bullet$ Portion of prepaid rent applicable to January: $2,700.
$\bullet$ Depreciation for January: $1,440.
$\bullet$ Portion of fees collected in advance earned in January: $3,300.
$\bullet$ Fees earned in January; not yet billed to customers: $1,950.
Net income for January is:

Accepted Answer

The answer of Before month-end adjustments are made, the January...

Question 7

The CPA firm auditing Mason Street Recording Studios found that total stockholders' equity was understated and liabilities were overstated. Which of the following errors could have been the cause?

Accepted Answer

Failing to record the earned portion of fees received in advance would cause liabilities to be overstated and stockholders' equity to be understated. This is because the fees received in advance represent a liability to provide services to the customers in the future, and the revenue earned from providing those services would increase stockholders' equity. Therefore, failing to record the earned portion of these fees would result in an overstatement of the liability and a corresponding understatement of stockholders' equity.

Question 8

The purpose of adjusting entries is to:

Accepted Answer

Adjusting entries are made to apply the realization principle and the matching principle to transactions affecting two or more accounting periods. This involves ensuring that revenues and expenses are recorded in the correct period in accordance with generally accepted accounting principles (GAAP). Adjusting entries may involve accruals, deferrals, estimates, or corrections of errors. Choices A, B, and D do not accurately reflect the purpose of adjusting entries.

Question 9

On June 1, 2008, the park purchased a 12-month insurance policy. Give the adjusting entry to record insurance coverage expiring in January. (Hint: The company adjusts its books on a monthly basis.)

Accepted Answer

The answer of On June 1, 2008, the park purchased...

Question 10

The CPA firm auditing Indian Company found that net income had been overstated. Which of the following errors could be the cause?

Accepted Answer

Failure to record depreciation expense for the period would result in an overstatement of net income because expenses would be understated.

Question 11

Employees are owed $1,200 for services since the last payday in January to be paid the first week of February. No adjust?ment was made for this item. As a result of this error:

Accepted Answer

The failure to record the wages payable results in an understatement of expenses, which leads to an overstatement of net income for January.

Question 12

Assume Fisher Company usually earns taxable income, but sustains a loss in the current period. The entry to record income taxes expense in the current period will most likely: (indicate all correct answers.)

Accepted Answer

The answer of Assume Fisher Company usually earns taxable income,...

Question 13

The equipment has an original estimated useful life of six years. Compute the book value of the equipment at January31 after the proper January adjustment is recorded:

Accepted Answer

The book value is calculated by subtracting accumulated depreciation from the original cost. Assuming the equipment was purchased at the beginning of the year and using straight-line depreciation, one year of depreciation would be deducted from the original cost.

Question 14

The adjusting entry to recognize an unrecorded expense is necessary:

Accepted Answer

An adjusting entry to recognize an unrecorded expense is necessary when the expense has been incurred but not yet recorded as of the end of the accounting period. This ensures that the financial statements reflect the accurate expenses for the period. Options A and B are incorrect because paying an expense in advance or an unpaid expense at the end of an accounting period may require other adjusting entries, but not necessarily to recognize unrecorded expenses. Option D is incorrect because forgetting to pay an expense does not make it an unrecorded expense; it would just be a mistake or oversight.

Question 15

According to attendance records, $8,200 of the Unearned Admission Revenue has been earned in January. Compute the amount of admissions revenue to be shown in the January income statement:

Accepted Answer

The answer of According to attendance records, $8,200 of the...

Question 16

On August 1, 2009, the park purchased a 12-month insurance policy. The necessary adjusting entry at January 31 includes which of the following entries? (Hint: The company has adjusted its books on a monthly basis.)

Accepted Answer

The answer of On August 1, 2009, the park purchased...

Question 17

The equipment has an original useful life of eight years. Compute the book value of the equipment at January 31 after the proper January adjustment is recorded. $__________

Accepted Answer

The answer of The equipment has an original useful life...

Question 18

The concept of materiality (indicate all correct answers):

Accepted Answer

Materiality is based on what users of financial statements consider important, and accountants must ensure that material items are accurately and appropriately disclosed, even if they are small in amount. Materiality does not permit accountants to ignore other generally accepted accounting principles or to use the easiest and most convenient means of accounting for events that are immaterial. Additionally, materiality does not specify a particular level of accuracy required in financial statements.

Question 19

According to attendance records, $4,800 of the Unearned Admission Revenue has been earned in January. Compute the balance in the following accounts after the proper adjustment is made.
Unearned Admission Revenue account balance $__________
Admission Revenue account balance $__________

Accepted Answer

The answer of According to attendance records, $4,800 of the...

Question 20

Of the following adjusting entries, which one results in an increase in liabilities and the recognition of an expense at the end of an accounting period?

Accepted Answer

Accruing salaries owed to employees at the end of the period means recognizing an expense, and this increases the liability of the company as it now owes money to its employees.

Quiz 4: The Accounting Cycle: Accruals and Deferrals

$900 is owed to employees for work since the last payday in January, to be paid the first week of February. What is the effect on January net income if the accountant fails to make any January 31 adjustment for this item?

At January 31, the amount of supplies on hand is $2,300. What amount is shown on the January income statement for supplies expense?

At January 31, the amount of supplies still on hand was determined to be $675. What amount should be reported in the January income statement for supplies expense? $__________

The CPA firm auditing Mason Street Recording Studios found that total stockholders' equity was understated and liabilities were overstated. Which of the following errors could have been the cause?

The purpose of adjusting entries is to:

On June 1, 2008, the park purchased a 12-month insurance policy. Give the adjusting entry to record insurance coverage expiring in January. (Hint: The company adjusts its books on a monthly basis.)

The CPA firm auditing Indian Company found that net income had been overstated. Which of the following errors could be the cause?

Employees are owed $1,200 for services since the last payday in January to be paid the first week of February. No adjust?ment was made for this item. As a result of this error:

Assume Fisher Company usually earns taxable income, but sustains a loss in the current period. The entry to record income taxes expense in the current period will most likely: (indicate all correct answers.)

The equipment has an original estimated useful life of six years. Compute the book value of the equipment at January31 after the proper January adjustment is recorded:

The adjusting entry to recognize an unrecorded expense is necessary:

According to attendance records, $8,200 of the Unearned Admission Revenue has been earned in January. Compute the amount of admissions revenue to be shown in the January income statement:

On August 1, 2009, the park purchased a 12-month insurance policy. The necessary adjusting entry at January 31 includes which of the following entries? (Hint: The company has adjusted its books on a monthly basis.)

The equipment has an original useful life of eight years. Compute the book value of the equipment at January 31 after the proper January adjustment is recorded. $__________

The concept of materiality (indicate all correct answers) :

According to attendance records, $4,800 of the Unearned Admission Revenue has been earned in January. Compute the balance in the following accounts after the proper adjustment is made. Unearned Admission Revenue account balance $ Admission Revenue account balance $

Of the following adjusting entries, which one results in an increase in liabilities and the recognition of an expense at the end of an accounting period?

Quiz 4: The Accounting Cycle: Accruals and Deferrals

$900 is owed to employees for work since the last payday in January, to be paid the first week of February. What is the effect on January net income if the accountant fails to make any January 31 adjustment for this item?

At January 31, the amount of supplies on hand is $2,300. What amount is shown on the January income statement for supplies expense?

At January 31, the amount of supplies still on hand was determined to be $675. What amount should be reported in the January income statement for supplies expense? $__________

The CPA firm auditing Mason Street Recording Studios found that total stockholders' equity was understated and liabilities were overstated. Which of the following errors could have been the cause?

The purpose of adjusting entries is to:

On June 1, 2008, the park purchased a 12-month insurance policy. Give the adjusting entry to record insurance coverage expiring in January. (Hint: The company adjusts its books on a monthly basis.)

The CPA firm auditing Indian Company found that net income had been overstated. Which of the following errors could be the cause?

Employees are owed $1,200 for services since the last payday in January to be paid the first week of February. No adjust?ment was made for this item. As a result of this error:

Assume Fisher Company usually earns taxable income, but sustains a loss in the current period. The entry to record income taxes expense in the current period will most likely: (indicate all correct answers.)

The equipment has an original estimated useful life of six years. Compute the book value of the equipment at January31 after the proper January adjustment is recorded:

The adjusting entry to recognize an unrecorded expense is necessary:

According to attendance records, $8,200 of the Unearned Admission Revenue has been earned in January. Compute the amount of admissions revenue to be shown in the January income statement:

On August 1, 2009, the park purchased a 12-month insurance policy. The necessary adjusting entry at January 31 includes which of the following entries? (Hint: The company has adjusted its books on a monthly basis.)

The equipment has an original useful life of eight years. Compute the book value of the equipment at January 31 after the proper January adjustment is recorded. $__________

The concept of materiality (indicate all correct answers) :

According to attendance records, $4,800 of the Unearned Admission Revenue has been earned in January. Compute the balance in the following accounts after the proper adjustment is made. Unearned Admission Revenue account balance $__________ Admission Revenue account balance $__________

Of the following adjusting entries, which one results in an increase in liabilities and the recognition of an expense at the end of an accounting period?

According to attendance records, $4,800 of the Unearned Admission Revenue has been earned in January. Compute the balance in the following accounts after the proper adjustment is made. Unearned Admission Revenue account balance $ Admission Revenue account balance $