Question 1

Adjusting entries

Accepted Answer

A)  Affect only income statement accounts 
B)  Affect only balance sheet accounts 
C)  Affect both income statement and balance sheet accounts 
D)  Affect only statement of cash flows accounts 
E)  Affect only equity accounts 
A)  Affect only income statement accounts 
B)  Affect only balance sheet accounts 
C)  Affect both income statement and balance sheet accounts 
D)  Affect only statement of cash flows accounts 
E)  Affect only equity accounts

Question 2

The partial unadjusted trial balance of Erif Corporation at December 31, 2020 follows. All accounts have normal balances.
   The following additional information is available at the December 31, 2020 year end: a. Insurance expense represents a 3-year insurance policy for the period from January 1, 2020 to December 31, 2022. b. A count of office supplies reveals that at December 31, 2020, the company had $500 of office supplies on hand. c. The company's lease, signed on January 1, 2020, specifies monthly rent of $4,000, or $48,000 a year. d. The December 2020 utility bill has not yet been received and is not included in the trial balance. The utility bill averages $400 a month. Required - Using the information above, find the balances in the following account balances, after adjustment, at December 31, 2020:
-Prepaid Rent

Accepted Answer

44,000 (48

Question 3

Failure to record depreciation expense will overstate the asset and understate the expense.

Accepted Answer

A) True 
 B)False

Question 4

The remaining balance in Prepaid Insurance on December 31, 2021 of $12,600 was for a six-month insurance policy purchased for $16,800 and in effect on July 1, 2020. What is the required adjustment amount on December 31st?

Accepted Answer

A)  $2,800 
B)  $4,750 
C)  $4,500 
D)  $5,000 
E)  $8,750 
A)  $2,800 
B)  $4,750 
C)  $4,500 
D)  $5,000 
E)  $8,750

Question 5

On July 1, 2021, JazzE Ltd. purchased a 3-year insurance policy and paid a premium of $60,000. JazzE has a December 31 year end. Under accrual accounting, which of the following statements best describes the effect of this transaction?

Accepted Answer

A)  The balance in the prepaid insurance account on December 31, 2022 will be $40,000. 
B)  The insurance expense account for the period ending December 31, 2022 will be $20,000. 
C)  The balance in the prepaid insurance account on December 31, 2022 will be $30,000. 
D)  The insurance expense account for the period ending December 31, 2022 will be $10,000. 
E)  The balance in the prepaid insurance account on December 31, 2022 will be $60,000. 
A)  The balance in the prepaid insurance account on December 31, 2022 will be $40,000. 
B)  The insurance expense account for the period ending December 31, 2022 will be $20,000. 
C)  The balance in the prepaid insurance account on December 31, 2022 will be $30,000. 
D)  The insurance expense account for the period ending December 31, 2022 will be $10,000. 
E)  The balance in the prepaid insurance account on December 31, 2022 will be $60,000.

Question 6

Identify and explain the reasons for the order in which financial statements are prepared.

Accepted Answer

The income statement is prepared first.

Question 7

Before recording adjusting entries on December 31, the Store Supplies account had a $1,900 debit balance, while a physical count of the supplies showed $300 of unused supplies on hand. Prepare the required adjusting entry.

Accepted Answer

To adjust for store

Question 8

Which of the following accounts is most likely associated with an accrued expense?

Accepted Answer

A)  Depreciation expense 
B)  Salaries Payable 
C)  Unearned revenue 
D)  Accounts Receivable 
E)  Service revenue 
A)  Depreciation expense 
B)  Salaries Payable 
C)  Unearned revenue 
D)  Accounts Receivable 
E)  Service revenue

Question 9

If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Services Revenue, the end-of-period adjusting entry to record the portion of these fees that has been earned is

Accepted Answer

A)  Debit Cash and credit Legal Service Revenue 
B)  Debit Cash and credit Unearned Legal Service Revenue 
C)  Debit Unearned Legal Service Revenue and credit Legal Service Revenue 
D)  Debit Legal Service Revenue and credit Unearned Legal Service Revenue 
E)  Some other entry 
A)  Debit Cash and credit Legal Service Revenue 
B)  Debit Cash and credit Unearned Legal Service Revenue 
C)  Debit Unearned Legal Service Revenue and credit Legal Service Revenue 
D)  Debit Legal Service Revenue and credit Unearned Legal Service Revenue 
E)  Some other entry

Question 10

If accrued salaries were recorded on December 31 with a credit to Salaries Payable, the entry to record payment of these wages on January 5 would include

Accepted Answer

A)  A debit to Cash and a credit to Salaries Payable 
B)  A debit to Cash and a credit to Prepaid Salaries 
C)  A debit to Salaries Payable and a credit to Cash 
D)  A debit to Salaries Payable and a credit to Salaries Expense 
E)  No entry would be necessary on January 5 
A)  A debit to Cash and a credit to Salaries Payable 
B)  A debit to Cash and a credit to Prepaid Salaries 
C)  A debit to Salaries Payable and a credit to Cash 
D)  A debit to Salaries Payable and a credit to Salaries Expense 
E)  No entry would be necessary on January 5

Question 11

Before adjusting for accrued revenues, both assets and equity are understated.

Accepted Answer

A) True 
 B)False

Question 12

The accrual basis of accounting is an accounting system in which revenues are reported as earned when cash is received.

Accepted Answer

A) True 
 B)False

Question 13

Discuss the types of adjusting entries used for prepaid expenses, depreciation, and unearned revenues.

Accepted Answer

Prepaid expenses are deferrals, or expen

Question 14

What was Grow's insurance expense for 2023?

Accepted Answer

A)  $4,500 
B)  $17,700 
C)  $18,000 
D)  $18,300 
E)  $8,700 
A)  $4,500 
B)  $17,700 
C)  $18,000 
D)  $18,300 
E)  $8,700

Question 15

The two main accounting principles used in the adjusting process are matching and full disclosure.

Accepted Answer

A) True 
 B)False

Question 16

The book value of an asset is equivalent to the market value of that asset.

Accepted Answer

A) True 
 B)False

Question 17

Under the cash basis of accounting, no adjustments are made for prepaid, unearned, and accrued items.

Accepted Answer

A) True 
 B)False

Question 18

For a prepaid expense, the adjusting entry would

Accepted Answer

A)  Result in a debit to an expense account and a credit to an asset account 
B)  Cause a prepaid expense to be overstated and liabilities to be understated 
C)  Result in a credit to an expense account and a debit to an asset account 
D)  Result in a debit to a liability account and a credit to an asset account 
E)  Decrease cash 
A)  Result in a debit to an expense account and a credit to an asset account 
B)  Cause a prepaid expense to be overstated and liabilities to be understated 
C)  Result in a credit to an expense account and a debit to an asset account 
D)  Result in a debit to a liability account and a credit to an asset account 
E)  Decrease cash

Question 19

Accrued expenses reflect transactions where cash is paid before a related expense is recognized.

Accepted Answer

A) True 
 B)False

Question 20

A business pays each of its two office employees each Friday at the rate of $60 per day for a five-day week that begins on Monday. If the accounting period ends on Tuesday and the employees worked on both Monday and Tuesday, the adjusting entry to record the salaries earned but unpaid is

Accepted Answer

A)  Debit Unpaid Salaries $120 and credit Salaries Payable $120 
B)  Debit Salaries Payable $240 and credit Office Salaries Expense $240 
C)  Debit Office Salaries Expense $120 and credit Salaries Payable $120 
D)  Debit Office Salaries Expense $240 and credit Salaries Payable $240 
E)  Debit Salaries Expense $240 and credit Cash $240 
A)  Debit Unpaid Salaries $120 and credit Salaries Payable $120 
B)  Debit Salaries Payable $240 and credit Office Salaries Expense $240 
C)  Debit Office Salaries Expense $120 and credit Salaries Payable $120 
D)  Debit Office Salaries Expense $240 and credit Salaries Payable $240 
E)  Debit Salaries Expense $240 and credit Cash $240

Adjusting entries

Failure to record depreciation expense will overstate the asset and understate the expense.

The remaining balance in Prepaid Insurance on December 31, 2021 of $12,600 was for a six-month insurance policy purchased for $16,800 and in effect on July 1, 2020. What is the required adjustment amount on December 31^st?

On July 1, 2021, JazzE Ltd. purchased a 3-year insurance policy and paid a premium of $60,000. JazzE has a December 31 year end. Under accrual accounting, which of the following statements best describes the effect of this transaction?

Identify and explain the reasons for the order in which financial statements are prepared.

Before recording adjusting entries on December 31, the Store Supplies account had a $1,900 debit balance, while a physical count of the supplies showed $300 of unused supplies on hand. Prepare the required adjusting entry.

Which of the following accounts is most likely associated with an accrued expense?

If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Services Revenue, the end-of-period adjusting entry to record the portion of these fees that has been earned is

If accrued salaries were recorded on December 31 with a credit to Salaries Payable, the entry to record payment of these wages on January 5 would include

Before adjusting for accrued revenues, both assets and equity are understated.

The accrual basis of accounting is an accounting system in which revenues are reported as earned when cash is received.

Discuss the types of adjusting entries used for prepaid expenses, depreciation, and unearned revenues.

What was Grow's insurance expense for 2023?

The two main accounting principles used in the adjusting process are matching and full disclosure.

The book value of an asset is equivalent to the market value of that asset.

Under the cash basis of accounting, no adjustments are made for prepaid, unearned, and accrued items.

For a prepaid expense, the adjusting entry would

Accrued expenses reflect transactions where cash is paid before a related expense is recognized.

A business pays each of its two office employees each Friday at the rate of $60 per day for a five-day week that begins on Monday. If the accounting period ends on Tuesday and the employees worked on both Monday and Tuesday, the adjusting entry to record the salaries earned but unpaid is

Accounting in Business

Analyzing and Recording Transactions

Completing the Accounting Cycle and Classifying Accounts

Accounting for Merchandising Activities

Inventory Costing and Valuation

Internal Control and Cash

Receivables

Property, Plant and Equipment Intangibles

Payroll Liabilities

Accounting Information Systems

Filters

Exam 3: Adjusting Accounts for Financial Statements

Adjusting entries

Failure to record depreciation expense will overstate the asset and understate the expense.

The remaining balance in Prepaid Insurance on December 31, 2021 of $12,600 was for a six-month insurance policy purchased for $16,800 and in effect on July 1, 2020. What is the required adjustment amount on December 31st?

On July 1, 2021, JazzE Ltd. purchased a 3-year insurance policy and paid a premium of $60,000. JazzE has a December 31 year end. Under accrual accounting, which of the following statements best describes the effect of this transaction?

Identify and explain the reasons for the order in which financial statements are prepared.

Before recording adjusting entries on December 31, the Store Supplies account had a $1,900 debit balance, while a physical count of the supplies showed $300 of unused supplies on hand. Prepare the required adjusting entry.

Which of the following accounts is most likely associated with an accrued expense?

If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Services Revenue, the end-of-period adjusting entry to record the portion of these fees that has been earned is

If accrued salaries were recorded on December 31 with a credit to Salaries Payable, the entry to record payment of these wages on January 5 would include

Before adjusting for accrued revenues, both assets and equity are understated.

The accrual basis of accounting is an accounting system in which revenues are reported as earned when cash is received.

Discuss the types of adjusting entries used for prepaid expenses, depreciation, and unearned revenues.

What was Grow's insurance expense for 2023?

The two main accounting principles used in the adjusting process are matching and full disclosure.

The book value of an asset is equivalent to the market value of that asset.

Under the cash basis of accounting, no adjustments are made for prepaid, unearned, and accrued items.

For a prepaid expense, the adjusting entry would

Accrued expenses reflect transactions where cash is paid before a related expense is recognized.

A business pays each of its two office employees each Friday at the rate of $60 per day for a five-day week that begins on Monday. If the accounting period ends on Tuesday and the employees worked on both Monday and Tuesday, the adjusting entry to record the salaries earned but unpaid is

Accounting in Business

Analyzing and Recording Transactions

Completing the Accounting Cycle and Classifying Accounts

Accounting for Merchandising Activities

Inventory Costing and Valuation

Internal Control and Cash

Receivables

Property, Plant and Equipment Intangibles

Payroll Liabilities

Accounting Information Systems

Filters

The remaining balance in Prepaid Insurance on December 31, 2021 of $12,600 was for a six-month insurance policy purchased for $16,800 and in effect on July 1, 2020. What is the required adjustment amount on December 31^st?