Question 1

Accumulated depreciation is shown on the balance sheet as a subtraction from the cost of its related asset.

Accepted Answer

A) True 
 B)False

Question 2

List the steps in the accounting cycle.

Accepted Answer

The accounting cycle consists of ten ste

Question 3

In the table below, indicate with an "X" in the proper column whether the account is a temporary (nominal) account or a permanent (real) account.

Accepted Answer

The answer of In the table below, indicate with an...

Question 4

The unadjusted trial balance and the adjustment data for Porter Business Institute, Inc. are given below along with adjusting entry information. What is the impact on net income if these adjustments are not recorded? Show the calculation for net income without the adjustments and net income with the adjustments. Which one gives the most accurate net income? Which accounting principles are being violated if the adjustments are not made?   Additional information items:
a. The Prepaid Insurance account consists of a payment for a 1 year policy. An analysis of the insurance invoice indicates that one half of the policy has expired by the end of the December 31 year-end.
b. A cash payment for space sublet for 8 months was received on July 1 and was credited to Unearned Rent.
c. Accrued interest expense on the note payable of $1,000 has been incurred but not paid.

Accepted Answer

a. Net income before the adjustments wou

Question 5

Failure to record depreciation expense will overstate assets and understate expenses.

Accepted Answer

A) True 
 B)False

Question 6

Each adjusting entry affects one or more income statements account, one or more balance sheet account, and never cash.

Accepted Answer

A) True 
 B)False

Question 7

What is the proper adjusting entry at December 31, the end of the accounting period, if the balance in the prepaid insurance account is $7,750 before adjustment, and the unexpired amount per analysis of policies is, $3,250?

Accepted Answer

A) Debit Insurance Expense, $3,250; credit Prepaid Insurance, $3,250. 
B) Debit Insurance Expense, $4,500; credit Prepaid Insurance, $4,500. 
C) Debit Prepaid Insurance, $4,500; credit Insurance Expense, $4,500. 
D) Debit Insurance Expense, $7,750; credit Prepaid Insurance, $7,750. 
E) Debit Cash, $7,750; credit Prepaid Insurance, $7,750. 
A) Debit Insurance Expense, $3,250; credit Prepaid Insurance, $3,250. 
B) Debit Insurance Expense, $4,500; credit Prepaid Insurance, $4,500. 
C) Debit Prepaid Insurance, $4,500; credit Insurance Expense, $4,500. 
D) Debit Insurance Expense, $7,750; credit Prepaid Insurance, $7,750. 
E) Debit Cash, $7,750; credit Prepaid Insurance, $7,750.

Question 8

Explain how accounting adjustments affect financial statements and provide an example of an adjustment that would impact the statements if not recorded.

Accepted Answer

Adjusting entries bring assets, liabilit

Question 9

A current ratio of 2.1 suggests that a company has ____________ current assets to cover current liabilities.

Accepted Answer

The answer of A current ratio of 2.1 suggests that...

Question 10

Which of the following are classified as current assets?

Accepted Answer

A) Office equipment. 
B) Patent. 
C) Unearned revenue. 
D) Office supplies. 
E) Land. 
A) Office equipment. 
B) Patent. 
C) Unearned revenue. 
D) Office supplies. 
E) Land.

Question 11

The trial balance prepared after all closing entries have been journalized and posted is called the:

Accepted Answer

A) Unadjusted trial balance. 
B) Post-closing trial balance. 
C) General ledger. 
D) Adjusted trial balance. 
E) Work sheet. 
A) Unadjusted trial balance. 
B) Post-closing trial balance. 
C) General ledger. 
D) Adjusted trial balance. 
E) Work sheet.

Question 12

Which of the following statements about a company's operating cycle is not true?

Accepted Answer

A) Non-current items are those expected to come due within one year or the company's operating cycle. 
B) The operating cycle is the time span from when cash is used to acquire goods and services until cash is received from the sale of goods and services. 
C) The length of a company's operating cycle depends on its activities. 
D) For a merchandiser selling products, the operating cycle is the time span between paying suppliers for merchandise and receiving cash from customers. 
E) Most operating cycles are less than one year. 
A) Non-current items are those expected to come due within one year or the company's operating cycle. 
B) The operating cycle is the time span from when cash is used to acquire goods and services until cash is received from the sale of goods and services. 
C) The length of a company's operating cycle depends on its activities. 
D) For a merchandiser selling products, the operating cycle is the time span between paying suppliers for merchandise and receiving cash from customers. 
E) Most operating cycles are less than one year.

Question 13

Current assets and current liabilities are expected to be used up or come due within one year or the company's operating cycle whichever is longer.

Accepted Answer

A) True 
 B)False

Question 14

A company pays each of its two office employees each Friday at the rate of $100 per day for a five-day week that begins on Monday. If the monthly accounting period ends on Tuesday and the employees worked on both Monday and Tuesday, the month-end adjusting entry to record the salaries earned but unpaid is:

Accepted Answer

A) Debit Unpaid Salaries $600 and credit Salaries Payable $600. 
B) Debit Salaries Expense $400 and credit Salaries Payable $400. 
C) Debit Salaries Expense $600 and credit Salaries Payable $600. 
D) Debit Salaries Payable $400 and credit Salaries Expense $400. 
E) Debit Salaries Expense $400 and credit Cash $400. 
A) Debit Unpaid Salaries $600 and credit Salaries Payable $600. 
B) Debit Salaries Expense $400 and credit Salaries Payable $400. 
C) Debit Salaries Expense $600 and credit Salaries Payable $600. 
D) Debit Salaries Payable $400 and credit Salaries Expense $400. 
E) Debit Salaries Expense $400 and credit Cash $400.

Question 15

If a company failed to make the end-of-period adjustment to move the amount of management fees that were earned from the Unearned Management Fees account to the Management Fees Revenue account, this omission would cause:

Accepted Answer

A) An overstatement of net income. 
B) An overstatement of assets. 
C) An overstatement of liabilities. 
D) An overstatement of equity. 
E) An understatement of liabilities. 
A) An overstatement of net income. 
B) An overstatement of assets. 
C) An overstatement of liabilities. 
D) An overstatement of equity. 
E) An understatement of liabilities.

Question 16

On April 1, Griffith Publishing Company received $1,548 from Santa Fe, Inc. for 36-month subscriptions to several different magazines. The company credited Unearned Fees for the amount received and the subscriptions started immediately. What is the adjusting entry that should be recorded by Griffith Publishing Company on December 31 of the second year?

Accepted Answer

A) debit Unearned Fees, $1,548; credit Fees Earned, $1,548. 
B) debit Unearned Fees, $516; credit Fees Earned, $516. 
C) debit Unearned Fees, $1,161; credit Fees Earned, $1,161. 
D) debit Unearned Fees, $129; credit Fees Earned, $129. 
E) debit Unearned Fees, $387; credit Fees Earned, $387. 
A) debit Unearned Fees, $1,548; credit Fees Earned, $1,548. 
B) debit Unearned Fees, $516; credit Fees Earned, $516. 
C) debit Unearned Fees, $1,161; credit Fees Earned, $1,161. 
D) debit Unearned Fees, $129; credit Fees Earned, $129. 
E) debit Unearned Fees, $387; credit Fees Earned, $387.

Question 17

The adjusting entry to record an accrued revenue is:

Accepted Answer

A) Increase an expense; increase a liability. 
B) Increase an asset; increase revenue. 
C) Decrease a liability; increase revenue. 
D) Increase an expense; decrease an asset. 
E) Increase an expense; decrease a liability. 
A) Increase an expense; increase a liability. 
B) Increase an asset; increase revenue. 
C) Decrease a liability; increase revenue. 
D) Increase an expense; decrease an asset. 
E) Increase an expense; decrease a liability.

Question 18

Assets, liabilities, and equity accounts are not closed; these accounts are called:

Accepted Answer

A) Nominal accounts. 
B) Temporary accounts. 
C) Permanent accounts. 
D) Contra accounts. 
E) Accrued accounts. 
A) Nominal accounts. 
B) Temporary accounts. 
C) Permanent accounts. 
D) Contra accounts. 
E) Accrued accounts.

Question 19

A company purchased new furniture at a cost of $16,000 on January 1. The furniture is estimated to have a useful life of 6 years and a $1,000 salvage value. The company uses the straight-line method of depreciation. What is the book value of the furniture on December 31 of the first year?

Accepted Answer

A) $16,000 
B) $15,000 
C) $2,500 
D) $13,500 
E) $13,333 
A) $16,000 
B) $15,000 
C) $2,500 
D) $13,500 
E) $13,333

Question 20

The unadjusted trial balance and the adjustment data for Porter Business Institute, Inc. are shown below along with adjusting entry information. What is the impact of the adjusting entries on the balance sheet? Show the calculation for total assets, total liabilities, and stockholders' equity without the adjustments; show the calculation for total assets, total liabilities, and stockholders' equity with the adjustments. Which one provides the most accurate presentation of the balance sheet?   Additional information items:
a. The Prepaid Insurance account consists of a payment for a 1 year policy. An analysis of the insurance invoice indicates that one half of the policy has expired by the end of the December 31 year-end.
b. A cash payment for space sublet for 8 months was received on July 1 and was credited to Unearned Rent.
c. Accrued interest expense on the note payable of $1,000 has been incurred but not paid.

Accepted Answer

@#IMG-DLM& @#IMG-DLM& The accrual basis gives the most accur

Accumulated depreciation is shown on the balance sheet as a subtraction from the cost of its related asset.

List the steps in the accounting cycle.

In the table below, indicate with an "X" in the proper column whether the account is a temporary (nominal) account or a permanent (real) account.

Failure to record depreciation expense will overstate assets and understate expenses.

Each adjusting entry affects one or more income statements account, one or more balance sheet account, and never cash.

What is the proper adjusting entry at December 31, the end of the accounting period, if the balance in the prepaid insurance account is $7,750 before adjustment, and the unexpired amount per analysis of policies is, $3,250?

Explain how accounting adjustments affect financial statements and provide an example of an adjustment that would impact the statements if not recorded.

A current ratio of 2.1 suggests that a company has ____________ current assets to cover current liabilities.

Which of the following are classified as current assets?

The trial balance prepared after all closing entries have been journalized and posted is called the:

Which of the following statements about a company's operating cycle is not true?

Current assets and current liabilities are expected to be used up or come due within one year or the company's operating cycle whichever is longer.

If a company failed to make the end-of-period adjustment to move the amount of management fees that were earned from the Unearned Management Fees account to the Management Fees Revenue account, this omission would cause:

The adjusting entry to record an accrued revenue is:

Assets, liabilities, and equity accounts are not closed; these accounts are called:

A company purchased new furniture at a cost of $16,000 on January 1. The furniture is estimated to have a useful life of 6 years and a $1,000 salvage value. The company uses the straight-line method of depreciation. What is the book value of the furniture on December 31 of the first year?

Introducing Financial Accounting

Accounting System and Financial Statements

Reporting and Analyzing Merchandising Operations

Reporting and Analyzing Inventories

Reporting and Analyzing Cash and Internal Controls

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Term Assets

Reporting and Analyzing Current Liabilities

Reporting and Analyzing Long-Term Liabilities

Reporting and Analyzing Equity

Reporting and Analyzing Cash Flows

Analyzing and Interpreting Financial Statements

Applying Present and Future Values

Investments and International Operations

Reporting and Analyzing Partnerships

Filters

Exam 3: Adjusting Accounts for Financial Statements

Accumulated depreciation is shown on the balance sheet as a subtraction from the cost of its related asset.

List the steps in the accounting cycle.

In the table below, indicate with an "X" in the proper column whether the account is a temporary (nominal) account or a permanent (real) account.

Failure to record depreciation expense will overstate assets and understate expenses.

Each adjusting entry affects one or more income statements account, one or more balance sheet account, and never cash.

What is the proper adjusting entry at December 31, the end of the accounting period, if the balance in the prepaid insurance account is $7,750 before adjustment, and the unexpired amount per analysis of policies is, $3,250?

Explain how accounting adjustments affect financial statements and provide an example of an adjustment that would impact the statements if not recorded.

A current ratio of 2.1 suggests that a company has ____________ current assets to cover current liabilities.

Which of the following are classified as current assets?

The trial balance prepared after all closing entries have been journalized and posted is called the:

Which of the following statements about a company's operating cycle is not true?

Current assets and current liabilities are expected to be used up or come due within one year or the company's operating cycle whichever is longer.

If a company failed to make the end-of-period adjustment to move the amount of management fees that were earned from the Unearned Management Fees account to the Management Fees Revenue account, this omission would cause:

The adjusting entry to record an accrued revenue is:

Assets, liabilities, and equity accounts are not closed; these accounts are called:

A company purchased new furniture at a cost of $16,000 on January 1. The furniture is estimated to have a useful life of 6 years and a $1,000 salvage value. The company uses the straight-line method of depreciation. What is the book value of the furniture on December 31 of the first year?

Introducing Financial Accounting

Accounting System and Financial Statements

Reporting and Analyzing Merchandising Operations

Reporting and Analyzing Inventories

Reporting and Analyzing Cash and Internal Controls

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Term Assets

Reporting and Analyzing Current Liabilities

Reporting and Analyzing Long-Term Liabilities

Reporting and Analyzing Equity

Reporting and Analyzing Cash Flows

Analyzing and Interpreting Financial Statements

Applying Present and Future Values

Investments and International Operations

Reporting and Analyzing Partnerships

Filters