Question 1

Every adjusting entry involves the recognition of either revenue or owner's equity.

Accepted Answer

A) True 
 B)False

Question 2

By what amount will the book value of the office equipment decline after the appropriate December adjustment is recorded?

Accepted Answer

A)  $1,560. 
B)  $130. 
C)  $0. 
D)  $1,430. 
A)  $1,560. 
B)  $130. 
C)  $0. 
D)  $1,430.

Question 3

On March 1, Hoffman paid in advance for four months' insurance. The necessary adjusting entry at March 31 includes which of the following?

Accepted Answer

A)  A credit to Prepaid Insurance for $2,340. 
B)  A credit to Prepaid Insurance for $780. 
C)  A debit to Prepaid Insurance for $2,340. 
D)  A debit to Prepaid Insurance for $780. 
A)  A credit to Prepaid Insurance for $2,340. 
B)  A credit to Prepaid Insurance for $780. 
C)  A debit to Prepaid Insurance for $2,340. 
D)  A debit to Prepaid Insurance for $780.

Question 4

End-of-period adjustments-effect on net income
Before making any year-end adjusting entries, the revenues of Hot Jazz Studio exceeded expenses by $127,000. However, the following adjustments are necessary:
(A.) Prepaid rent consumed, $1,500.
(B.) Services rendered to clients but not yet billed, $20,000.
(C.) Interest accrued on notes payable, $1,100.
(D.) Depreciation, $4,800.
(E.) Accrued wages payable, $3,900.
(F.) Fees collected in advance which have now been earned, $7,100.
Complete the schedule to determine the net income of Hot Jazz Studio after these adjustments have been recorded. Show the effect of each adjustment in the space provided. Compute net income after adjustments and place answer in space provided.

Accepted Answer

The answer of End-of-period adjustments-effect on net income
Before making any...

Question 5

The adjusted trial balance may be used in place of the income statement.

Accepted Answer

A) True 
 B)False

Question 6

The equipment had an estimated useful life of five years. Compute the book value of the equipment at March 31, after the proper March adjustment is recorded.

Accepted Answer

A)  $10,833. 
B)  $15,167. 
C)  $25,567. 
D)  $10,400. 
A)  $10,833. 
B)  $15,167. 
C)  $25,567. 
D)  $10,400.

Question 7

Gordy's Corp. has seven employees. Each earns $800 per week for a five day work week ending on Friday. This month, the last day of the month falls on a Thursday. The company should make an adjusting entry:

Accepted Answer

A)  Debiting Wage Expense for $4,480 and crediting Wages Payable for $4,480. 
B)  Debiting Wage Expense for $640 and crediting Wages Payable for $640. 
C)  Crediting Wage Expense for $4,480 and debiting Wages Payable for $4,480. 
D)  Crediting Wage Expense for $640 and debiting Wages Payable for $640. 
A)  Debiting Wage Expense for $4,480 and crediting Wages Payable for $4,480. 
B)  Debiting Wage Expense for $640 and crediting Wages Payable for $640. 
C)  Crediting Wage Expense for $4,480 and debiting Wages Payable for $4,480. 
D)  Crediting Wage Expense for $640 and debiting Wages Payable for $640.

Question 8

Which of the following is not an example of an adjusting entry?

Accepted Answer

A)  The entry to record unpaid expenses. 
B)  The entry to record uncollected revenues. 
C)  The entry to convert liabilities to revenue. 
D)  The entry to pay outstanding bills. 
A)  The entry to record unpaid expenses. 
B)  The entry to record uncollected revenues. 
C)  The entry to convert liabilities to revenue. 
D)  The entry to pay outstanding bills.

Question 9

Unpaid expenses may be included as an expense on the income statement.

Accepted Answer

A) True 
 B)False

Question 10

Gourmet Shop purchased cash registers on April 1 for $12,000. If this asset has an estimated useful life of four years, what is the book value of the cash registers on May 31?

Accepted Answer

A)  $250. 
B)  $3,000. 
C)  $9,000. 
D)  $11,500. 
A)  $250. 
B)  $3,000. 
C)  $9,000. 
D)  $11,500.

Question 11

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

A)  A debit to Insurance Expense for $1,050. 
B)  A credit to Unexpired Insurance for $11,550. 
C)  A credit to Unexpired Insurance for $1,800. 
D)  A debit to Unexpired Insurance for $10,800. 
A)  A debit to Insurance Expense for $1,050. 
B)  A credit to Unexpired Insurance for $11,550. 
C)  A credit to Unexpired Insurance for $1,800. 
D)  A debit to Unexpired Insurance for $10,800.

Question 12

Which of the following activities is least likely to be limited to "year-end"?

Accepted Answer

A)  Closing the accounts. 
B)  Drafting notes to accompany statements. 
C)  Recording routine transactions. 
D)  Undergoing an audit. 
A)  Closing the accounts. 
B)  Drafting notes to accompany statements. 
C)  Recording routine transactions. 
D)  Undergoing an audit.

Question 13

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

A)  Assets at January 31 are overstated. 
B)  January net income is overstated. 
C)  Liabilities at January 31 are overstated. 
D)  Owners' equity at January 31 is understated. 
A)  Assets at January 31 are overstated. 
B)  January net income is overstated. 
C)  Liabilities at January 31 are overstated. 
D)  Owners' equity at January 31 is understated.

Question 14

An expenditure that benefits the year in which it is made should be deducted from revenue in the same year.

Accepted Answer

A) True 
 B)False

Question 15

Unearned revenue is:

Accepted Answer

A)  An asset. 
B)  Income. 
C)  A liability. 
D)  An expense. 
A)  An asset. 
B)  Income. 
C)  A liability. 
D)  An expense.

Question 16

Depreciation expense is:

Accepted Answer

A)  Only an estimate. 
B)  An exact calculation prepared by an appraiser. 
C)  Not to be calculated unless the exact life of an asset can be determined. 
D)  To be determined for all assets owned by a company. 
A)  Only an estimate. 
B)  An exact calculation prepared by an appraiser. 
C)  Not to be calculated unless the exact life of an asset can be determined. 
D)  To be determined for all assets owned by a company.

Question 17

Prepaid expenses are assets that should appear on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 18

Before making month-end adjustments, net income of Bobwhite Company was $232,000 for March. Adjusting entries are necessary for the following items: -Depreciation for the month of March: $4,300.
-Interest income accrued to March 31, on deposits in banks: $900.
-Supplies used in March: $300.
-Fees earned in March that had been collected in advance: $3,600.
After recording these adjustments, net income for March is:

Accepted Answer

A)  $222,900. 
B)  $227,700. 
C)  $231,900. 
D)  $235,600. 
A)  $222,900. 
B)  $227,700. 
C)  $231,900. 
D)  $235,600.

Question 19

The book value of a depreciable asset can be determined by its market value at a particular time.

Accepted Answer

A) True 
 B)False

Question 20

Rose Corp. has a note receivable from Jewel Co for $80,000. The note matures in 5 years and bears interest of 6%. Rose is preparing financial statements for the month of June. Rose should make an adjusting entry:

Accepted Answer

A)  Debiting Interest Revenue for $400 and crediting Interest Receivable for $400. 
B)  Debiting Interest Receivable for $400 and crediting Interest Revenue for $400. 
C)  Debiting Interest Revenue for $4,800 and crediting Interest Receivable for $4,800. 
D)  Crediting Interest Payable for $400 and debiting Interest Expense for $400. 
A)  Debiting Interest Revenue for $400 and crediting Interest Receivable for $400. 
B)  Debiting Interest Receivable for $400 and crediting Interest Revenue for $400. 
C)  Debiting Interest Revenue for $4,800 and crediting Interest Receivable for $4,800. 
D)  Crediting Interest Payable for $400 and debiting Interest Expense for $400.

Exam 4: The Accounting Cycle: Accruals and Deferrals

Every adjusting entry involves the recognition of either revenue or owner's equity.

By what amount will the book value of the office equipment decline after the appropriate December adjustment is recorded?

On March 1, Hoffman paid in advance for four months' insurance. The necessary adjusting entry at March 31 includes which of the following?

The adjusted trial balance may be used in place of the income statement.

The equipment had an estimated useful life of five years. Compute the book value of the equipment at March 31, after the proper March adjustment is recorded.

Gordy's Corp. has seven employees. Each earns $800 per week for a five day work week ending on Friday. This month, the last day of the month falls on a Thursday. The company should make an adjusting entry:

Which of the following is not an example of an adjusting entry?

Unpaid expenses may be included as an expense on the income statement.

Gourmet Shop purchased cash registers on April 1 for $12,000. If this asset has an estimated useful life of four years, what is the book value of the cash registers on May 31?

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.)

Which of the following activities is least likely to be limited to "year-end"?

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:

An expenditure that benefits the year in which it is made should be deducted from revenue in the same year.

Unearned revenue is:

Depreciation expense is:

Prepaid expenses are assets that should appear on the balance sheet.

The book value of a depreciable asset can be determined by its market value at a particular time.

Rose Corp. has a note receivable from Jewel Co for $80,000. The note matures in 5 years and bears interest of 6%. Rose is preparing financial statements for the month of June. Rose should make an adjusting entry:

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values Answer Key

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