Question 1

How much did Grow pay for insurance before December 31, 2023 for insurance coverage in 2024?

Accepted Answer

A)  $4,200 
B)  $4,500 
C)  $17,700 
D)  $18,000 
E)  $8,700

Question 2

The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is

Accepted Answer

A)  Accrual basis accounting 
B)  The operating cycle of a business 
C)  Cash basis accounting 
D)  The revenue recognition principle 
E)  The matching principle

Question 3

An unadjusted trial balance is a listing of accounts prepared before adjustments are recorded.

Accepted Answer

A) True 
 B)False

Question 4

The Office Supplies account shows a beginning balance of $600 and an ending balance of $400. If office supplies expense for the year is $3,100, what amount of office supplies was purchased during the year?

Accepted Answer

A)  $2,700 
B)  $2,900 
C)  $3,300 
D)  $3,500 
E)  $3,700

Question 5

Depreciation attempts to adjust the ledger account balances for assets to equate to their current market value.

Accepted Answer

A) True 
 B)False

Question 6

HCF, a finance company, lends Able Business $12,000 at 5% on December 1, 2020. HCF's adjusting entry on December 31, 2020, should include

Accepted Answer

A)  A debit to Interest Earned for $50 
B)  A credit to Interest Receivable for $50 
C)  A credit to Interest Earned for $50 
D)  A debit to Cash for $600 
E)  A debit to Interest Expense for $600

Question 7

The purpose of depreciation is to

Accepted Answer

A)  Measure the change in an asset's value 
B)  Adjust the carrying value of an asset to market value 
C)  Allocate the asset's cost to the periods benefiting from its use 
D)  Recognize the reduced usefulness of an asset 
E)  Adjust the ledger account balances for assets to equate to their current market value

Question 8

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

Accepted Answer

A)  Balance sheet 
B)  Adjusted trial balance 
C)  Unadjusted trial balance 
D)  Summary trial balance 
E)  Income statement

Question 9

The timeliness principle assumes that an organization's activities can be divided into specific periods.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Before recording adjusting entries, the Office Supplies account had a $359 debit balance while a physical count of the supplies showed $105 of unused supplies on hand. Thus, the required adjusting entry is

Accepted Answer

A)  Debit Office Supplies $105 and credit Office Supplies Expense $105 
B)  Debit Office Supplies Expense $254 and credit Office Supplies $254 
C)  Debit Office Supplies Expense $105 and credit Office Supplies $105 
D)  Debit Office Supplies $254 and credit Office Supplies Expense $254 
E)  Some other entry

Question 12

Adjusting entries are journal entries made at the end of an accounting period for the purpose of

Accepted Answer

A)  Updating related liability and asset accounts 
B)  Assigning revenues to the period in which they are earned 
C)  Assigning expenses to the period in which the expiration of benefit has incurred 
D)  Recording internal transactions 
E)  All of these

Question 13

If equipment were purchased from an outside party, the using up of the equipment's economic benefit would be considered an external transaction.

Accepted Answer

A) True 
 B)False

Question 14

Adjustments are necessary for transactions and events that extend over more than one accounting period.

Accepted Answer

A) True 
 B)False

Question 15

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:
-Office Supplies Expense

Accepted Answer

The answer of The partial unadjusted trial balance of Erif...

Question 16

A company paid the $1,350 premium on a three-year insurance policy on April 1, 2020. The policy gave protection beginning on that date. How many dollars of the premium will appear as an expense on the calendar year 2020 income statement assuming the accrual basis of accounting? Assuming the cash basis of accounting?

Accepted Answer

A)  $1,350 accrual basis; $337.50 cash basis 
B)  $450 accrual basis; $450 cash basis 
C)  $337.50 accrual basis; $1,350 cash basis 
D)  $1,012.50 accrual basis; $1,350 cash basis 
E)  $1,350 accrual basis; $1,350 cash basis

Question 17

On January 8, Gallery Corp. records $5,000 of accrued salaries. On January 15, $10,000 of salaries are paid. The entry on January 15 includes a debit to the Salaries Payable account.

Accepted Answer

A) True 
 B)False

Question 18

In preparing financial statements from the trial balance, the balance sheet is prepared first.

Accepted Answer

A) True 
 B)False

Question 19

The approach to preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called

Accepted Answer

A)  Accrual basis accounting 
B)  The operating cycle of a business 
C)  Cash basis accounting 
D)  The revenue recognition principle 
E)  The matching principle

Question 20

A contra account is an account the balance of which is added to the balance of an associated account to show a more proper amount for the item recorded in the associated account.

Accepted Answer

A) True 
 B)False

Exam 3: Adjusting Accounts for Financial Statements

How much did Grow pay for insurance before December 31, 2023 for insurance coverage in 2024?

The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is

An unadjusted trial balance is a listing of accounts prepared before adjustments are recorded.

The Office Supplies account shows a beginning balance of $600 and an ending balance of $400. If office supplies expense for the year is $3,100, what amount of office supplies was purchased during the year?

Depreciation attempts to adjust the ledger account balances for assets to equate to their current market value.

HCF, a finance company, lends Able Business $12,000 at 5% on December 1, 2020. HCF's adjusting entry on December 31, 2020, should include

The purpose of depreciation is to

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

The timeliness principle assumes that an organization's activities can be divided into specific periods.

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

Before recording adjusting entries, the Office Supplies account had a $359 debit balance while a physical count of the supplies showed $105 of unused supplies on hand. Thus, the required adjusting entry is

Adjusting entries are journal entries made at the end of an accounting period for the purpose of

If equipment were purchased from an outside party, the using up of the equipment's economic benefit would be considered an external transaction.

Adjustments are necessary for transactions and events that extend over more than one accounting period.

On January 8, Gallery Corp. records $5,000 of accrued salaries. On January 15, $10,000 of salaries are paid. The entry on January 15 includes a debit to the Salaries Payable account.

In preparing financial statements from the trial balance, the balance sheet is prepared first.

The approach to preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called

A contra account is an account the balance of which is added to the balance of an associated account to show a more proper amount for the item recorded in the associated account.