Question 1

Due to an oversight,the company bookkeeper made no adjusting entry for accrued and unpaid employee wages of $24,000 on December 31.This oversight would:

Accepted Answer

The oversight would overstate net income by $24,000 because the wages expense was not recorded, leading to higher reported income.

Question 2

At year-end,the accountant for Del Carpio Diaper Service noted the following errors in the trial balance:  Using the form below,indicate if each error would cause the trial balance to be out of balance,the amount of any imbalance,and if a correcting entry is required.

Accepted Answer

The answer of At year-end,the accountant for Del Carpio Diaper...

Question 3

The adjusted trial balance contains information pertaining to:

Accepted Answer

The adjusted trial balance contains information about all general ledger accounts, which include both balance sheet and income statement accounts.

Question 4

A trial balance prepared before any adjustments have been recorded is:

Accepted Answer

A trial balance prepared before any adjustments have been recorded is called an unadjusted trial balance. This trial balance lists all the accounts with their balances, showing the total debits equal to the total credits. It is used to detect any mathematical errors and to ensure that the total debits equal the total credits. However, it does not reflect any adjustments made to accounts during the accounting period, so it is not yet ready to be used to prepare financial statements.

Question 5

On December 14,2015,Kinsmen Company received $7,700 for consulting services that will be performed in January 2016.Prepare a general journal entry to record the receipt.

Accepted Answer

The answer of On December 14,2015,Kinsmen Company received $7,700 for...

Question 6

Unearned revenue is reported in the financial statements as:

Accepted Answer

Unearned revenue represents payments from customers for goods or services that have not yet been delivered. Therefore, it is considered a liability as the company owes this service or product delivery to its customers. It will be recognized as revenue on the income statement when the delivery is made.

Question 7

The following journal entry (incorrectly)recorded the purchase of office supplies for $1,200 on credit:  What entry or entries best correct and document the correction of this error?

Accepted Answer

To correct the error, we need to make a journal entry that debits the Office Supplies account and credits Accounts Payable account. Therefore, option B is the correct choice as it records the correct entry.

Question 8

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

Accepted Answer

A trial balance that has been prepared after adjusting entries have been made is called an adjusted trial balance. This type of trial balance is used to ensure that the total debit balances equal the total credit balances after adjusting entries have been made.

Question 9

Before recording adjusting entries on December 31,the Store Supplies account had a $900 debit balance,while a physical count of the supplies showed $325 of unused supplies on hand.Prepare the required adjusting entry.

Accepted Answer

The answer of Before recording adjusting entries on December 31,the...

Question 10

Throughout an accounting period,the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees.If the accountant fails to make the end-of-period adjusting entry to record the portion of these fees that has been earned,one effect will be:

Accepted Answer

If the adjusting entry is not made, the earned portion of the fees will not be recognized as revenue, leading to an understatement of equity since revenue increases equity.

Question 11

If the accountant failed to make the end-of-period adjustment to reduce the Unearned Management Fees account by the amount of management fees earned,the omission would cause:

Accepted Answer

The omission would cause an overstatement of liabilities because the Unearned Management Fees account, a liability, would not be reduced to reflect the fees that have been earned.

Question 12

A balance sheet that places the assets above the liabilities and equity is called a(n):

Accepted Answer

A report form balance sheet places the assets above the liabilities and equity and is considered to be a more user-friendly format for non-accounting professionals to read and understand.

Question 13

The following journal entry (incorrectly)recorded the purchase of office supplies for $1,200 on credit:  If only one entry is to be made to correct this entry it would be:

Accepted Answer

The answer of The following journal entry (incorrectly)recorded the purchase...

Question 14

Under the alternative method for accounting for unearned revenues,which of the following pairs of journal entry formats is correct?

Accepted Answer

The correct format for the journal entries would be:
1. When the unearned revenue is initially received:
Cash (or Accounts Receivable) Dr. XXXX
Unearned Revenue Cr. XXXX

2. When the revenue is earned:
Unearned Revenue Dr. XXXX
Revenue Cr. XXXX

Option B contains the correct format for the journal entry. The other options either have incorrect account titles or are not in the correct format for the alternative method of accounting for unearned revenues.

Question 15

Under the alternative method for accounting for prepaid expenses,which of the following pairs of journal entry formats is correct?

Accepted Answer

The answer of Under the alternative method for accounting for...

Question 16

If an accountant forgot to record depreciation on office equipment at the end of an accounting period,what is the effect on the statements prepared at that time?

Accepted Answer

The answer of If an accountant forgot to record depreciation...

Question 17

Which of the following statements is incorrect?

Accepted Answer

The cash basis of accounting is not consistent with GAAP (Generally Accepted Accounting Principles), which require accrual basis accounting. The cash basis only records transactions when cash is received or paid, while accrual basis records transactions as they occur, whether or not cash has been exchanged.

Question 18

Financial statements are prepared in the following order:

Accepted Answer

The correct order for preparing financial statements is to start with the income statement, which shows the company's revenues and expenses. Next is the statement of changes in equity, which reflects changes in the company's equity from transactions and other events. Finally, the balance sheet is prepared, which presents the company's financial position at a point in time. This order ensures that the necessary information from the income statement and statement of changes in equity is available for preparing the balance sheet.

Question 19

If the accountant failed to make an adjusting entry at the end of the period to record depreciation for the period,the omission will cause:

Accepted Answer

Failure to record depreciation will result in an overstatement of assets since depreciation reduces the value of assets over time. Therefore, if no depreciation is recorded, the assets will be overstated.

Question 20

A balance sheet that places the liabilities and equity to the right of the assets is called a(n):

Accepted Answer

The account form balance sheet is the traditional format where assets are listed on the left side and liabilities and equity are listed on the right side.

Quiz 3: Adjusting Accounts for Financial Statements