Question 1

Arid Company paid $1,704 on June 1,2013,for a two-year insurance policy and recorded the entire amount as Insurance Expense.The December 31,2013,adjusting entry is

Accepted Answer

The insurance policy covers two years, so the annual cost is $1,704 / 2 = $852. From June 1 to December 31 is 7 months, so 7/12 of the annual cost is used, which is $852 * (7/12) = $497. The remaining balance for the next 17 months is $1,704 - $497 = $1,207, which should be recorded as Prepaid Insurance (an asset), not an expense. Therefore, the correct entry is to debit Prepaid Insurance and credit Insurance Expense for $1,207, to adjust the initially recorded expense to the correct amount for the period.

Question 2

Which of the following is presented in a balance sheet?

Accepted Answer

Prepaid expenses are presented on the balance sheet as an asset. Revenues, net income, and gains are presented on the income statement.

Question 3

Iowa Cattle Company uses a perpetual inventory system.Iowa purchased cattle from Big D Ranch at a cost of $19,500,payable at time of delivery.The entry to record the delivery would be

Accepted Answer

In a perpetual inventory system, purchases of inventory are recorded directly in the Inventory account. Since the payment is made at the time of delivery, the entry would debit Inventory and credit Cash.

Question 4

Beginning and ending Accounts Receivable balances were $28,000 and $24,000,respectively.If collections from clients during the period were $80,000,then total services rendered on account were apparently

Accepted Answer

Beginning AR + Services Rendered - Collections = Ending AR$28,000 + Services Rendered - $80,000 = $24,000Services Rendered = $84,000

Question 5

Which of the following is not presented in an income statement?

Accepted Answer

Dividends are not presented in an income statement, as they are not an expense or revenue item. They are listed separately in the statement of retained earnings or the statement of changes in equity.

Question 6

Sky Corporation's salaries expense for 2012 was $136,000.Accrued salaries payable on December 31,2013,was $17,800 and $8,400 on December 31,2012.The cash paid for salaries during 2013 was

Accepted Answer

Salaries expense for 2013 = $136,000 + ($17,800 - $8,400) = $145,400. Cash paid for salaries during 2013 = $145,400 - $17,800 = $127,600.

Question 7

If an expense has been incurred but not yet recorded,then the end-of-period adjusting entry would involve

Accepted Answer

An expense that has been incurred but not yet recorded would require an adjusting entry that debits an expense account (to recognize the expense) and credits a liability account (to record the obligation to pay for the expense in the future).

Question 8

Winston Company sells magazine subscriptions for one- to three-year subscription periods.Cash receipts from subscribers are credited to Magazine Subscriptions Collected in Advance,and this account had a balance of $9,600,000 at December 31,2013,before year-end adjustment.Outstanding subscriptions at December 31,2013,expire as follows:  In its December 31,2013,balance sheet,what amount should Winston report as the balance for magazine subscriptions collected in advance?

Accepted Answer

The answer of Winston Company sells magazine subscriptions for one-...

Question 9

Failure to record depreciation expense at the end of an accounting period results in

Accepted Answer

Failure to record depreciation expense at the end of an accounting period results in overstated assets. This is because depreciation expense reduces the value of assets over time, and not recording it results in an overstatement of the asset's value on the balance sheet.

Question 10

An example of an adjusting entry involving a deferred revenue is

Accepted Answer

An adjusting entry involving a deferred revenue would involve recognizing revenue that was previously recorded as unearned revenue. Therefore, the correct option is C: Unearned Rental Revenue would be debited to reduce the liability and Rental Revenue would be credited to recognize the revenue earned. Options A, B, and D do not involve deferred revenue.

Question 11

Moon Company purchased equipment on November 1,2013,by giving its supplier a 12-month,9 percent note with a face value of $48,000.The December 31,2013,adjusting entry is

Accepted Answer

The adjusting entry is made to record the interest expense incurred for the two months (November and December). The calculation of interest is as follows:

$48,000 x 0.09 x 2/12 = $720

Therefore, the entry should be to debit Interest Expense and credit Interest Payable for $720.

Question 12

The following errors were made in preparing a trial balance: the $1,350 balance of Inventory was omitted;the $450 balance of Prepaid Insurance was listed as a credit;and the $300 balance of Salaries Expense was listed as Utilities Expense.The debit and credit totals of the trial balance would differ by

Accepted Answer

The answer of The following errors were made in preparing...

Question 13

Crescent Corporation's interest revenue for 2013 was $13,100.Accrued interest receivable on December 31,2013,was $2,275 and $1,875 on December 31,2012.The cash received for interest during 2013 was

Accepted Answer

The cash received for interest is calculated by adjusting the interest revenue for changes in accrued interest receivable: $13,100 (interest revenue) - ($2,275 - $1,875) (change in accrued interest) = $12,700.

Question 14

Iowa Cattle Company uses a periodic inventory system.Iowa purchased cattle from Big D Ranch at a cost of $27,000 on credit.The entry to record the receipt of the cattle would be

Accepted Answer

Under a periodic inventory system, purchases of inventory are recorded in a Purchases account rather than directly to the Inventory account. Since the purchase was made on credit, Accounts Payable is credited.

Question 15

The allowance for doubtful accounts is an example of a(n)

Accepted Answer

The allowance for doubtful accounts is a contra account because it is used to reduce the balance of the accounts receivable account. It represents the estimated amount of accounts receivable that may not be collected due to credit risks or other factors. As a contra account, it has a credit balance that is deducted from the debit balance of accounts receivable to arrive at the net realizable value.

Question 16

The Supplies on Hand account balance at the beginning of the period was $6,600.Supplies totaling $12,825 were purchased during the period and debited to Supplies on Hand.A physical count shows $3,825 of Supplies on Hand at the end of the period.The proper journal entry at the end of the period

Accepted Answer

The beginning balance plus purchases equals $19,425 ($6,600 + $12,825). The ending balance is $3,825, so the supplies used (expense) is $15,600 ($19,425 - $3,825). Therefore, debit Supplies Expense and credit Supplies on Hand for $15,600.

Question 17

In November and December 2013,Bee Company,a newly organized newspaper publisher,received $72,000 for 1,000 three-year subscriptions at $24 per year,starting with the January 2,2014,issue of the newspaper.How much should Bee report in its 2013 income statement for subscription revenue?

Accepted Answer

Revenue recognition principles dictate that revenue should be recognized when it is earned, regardless of when the payment is received. Since Bee Company has not provided any newspapers in 2013 (the subscriptions start in January 2014), it has not earned any subscription revenue in 2013. Therefore, the entire amount received in 2013 should be recorded as unearned revenue (a liability) on the balance sheet, and no subscription revenue should be reported in the 2013 income statement.

Question 18

On March 1,2012,Forest Co.borrowed cash and signed a 36-month,interest-bearing note on which both the principal and interest are payable on February 28,2015.At December 31,2014,the liability for accrued interest should be

Accepted Answer

The liability for accrued interest at December 31, 2014, would be for 34 months. This is because the note was signed on March 1, 2012, and interest would start accruing from that date until December 31, 2014, which is a period of 34 months.

Question 19

For a given year,beginning and ending total liabilities were $8,400 and $10,000,respectively.At year-end,owners' equity was $26,000 and total assets were $2,000 larger than at the beginning of the year.If new capital stock issued exceeded dividends by $2,400,net income (loss)for the year was apparently

Accepted Answer

The answer of For a given year,beginning and ending total...

Question 20

On December 31 of the current year,Holmgren Company's bookkeeper made an entry debiting Supplies Expense and crediting Supplies on Hand for $12,600.The Supplies on Hand account had a $15,300 debit balance on January 1.The December 31 balance sheet showed Supplies on Hand of $11,400.Only one purchase of supplies was made during the month,on account.The entry for that purchase was

Accepted Answer

The entry made on December 31 debited Supplies Expense for $12,600 and credited Supplies on Hand, indicating that $12,600 worth of supplies were used during the month. The Supplies on Hand balance on January 1 was $15,300, and the balance sheet on December 31 showed a balance of $11,400, indicating that the company used $3,900 worth of supplies during the month ($15,300 - $11,400 = $3,900).

Since there was only one purchase of supplies during the month, and the total amount of supplies used was $3,900, the amount of the purchase must have been $8,700 ($8,700 + $3,900 = $12,600). The purchase was made on account, so the entry would be to debit Supplies on Hand (increasing it to account for the new purchase) and credit Accounts Payable (since the company owed for the purchase). Thus, the answer is C - debit Supplies on Hand, $8,700 and credit Accounts Payable, $8,700.

Quiz 2: A Review of the Accounting Cycle