Question 1

The alphabetical listing below includes all of the adjusted account balances of Battle Creek,Inc.as of December 31,2018.All account balances are normal.
 $\begin{array}{lr}
\text { Accounts Payable } & \$, 000 \
\text { Accounts Receivable } & 16,000 \
\text { Accumulated Depreciation } & 6,000 \
\text { Common Stock } & 4,000 \
\text { Cash } & 10,000 \
\text { Depreciation Expense } & 2,000 \
\text { Dividends } & 2,000 \
\text { Equipment } & 18,000 \
\text { Income Tax Expense } & 2,000 \
\text { Income Taxes Payable } & 2,000 \
\text { Rent Expense } & 4,000 \
\text { Retained Earnings } & 6,000 \
\text { Salaries and Wages Expense } & 8,000 \
\text { Service Revenue } & 36,000 \
\text { Deferred Revenue } & 2,000
\end{array}$ Required:
Part a.Prepare the closing entries.
Part b.Prepare the post-closing trial balance as of December 31,2018.
Part c.Prepare the classified balance sheet at December 31,2018.

Accepted Answer

The answer of The alphabetical listing below includes all of...

Question 2

The amounts of all the accounts reported on the balance sheet can be taken from the adjusted trial balance.

Accepted Answer

A) True 
 B)False

Question 3

What is the main difference between accrual and deferral adjustments?

Accepted Answer

A) Deferral adjustments are required to update previously recorded items whereas accrual adjustments are required to include items not previously recorded. 
B) Deferral adjustments are required under the cash basis of accounting whereas accrual adjustments are required under the accrual basis of accounting. 
C) Deferral adjustments are required to include items not previously recorded whereas accrual adjustments are required to update previously recorded items. 
D) Deferral adjustments are used for expenses whereas accrual adjustments are used for revenues.

Question 4

Sugar,Inc.made an adjusting entry on December 31 to record $580 of revenues earned but not yet collected.Which of the following describes the adjusting entry?

Accepted Answer

A) Cash should be decreased by $580 and Sales Revenue should be increased by $580. 
B) Deferred Revenue should be increased by $580 and Sales Revenue should be decreased by $580. 
C) Accounts Receivable should be increased by $580 and Sales Revenue should be increased by $580. 
D) Accounts Receivable should be increased by $580 and Deferred Revenue should be increased by $580.

Question 5

Match each transaction with the type of entry that will be required at April 30,the company's year-end.
-The weekly payroll of $5,000 to be paid next week is recorded.

Accepted Answer

A) Closing entry 
B) Deferral adjusting entry 
C) Accrual adjusting entry

Question 6

Which of the following statements about adjustments is correct?

Accepted Answer

A) Accrued wages are wages owed,but not yet paid,to employees;the accrued wages will need to be recorded with an adjusting entry that increases expenses. 
B) When making an adjustment to recognize supplies used in a period,total assets will not change. 
C) Deferral adjustments are used to update amounts that have been previously deferred on the income statement. 
D) Depreciation is an example of an accrual adjustment.

Question 7

After posting the adjusting entry to record revenues earned but not yet collected,which account will be increased?

Accepted Answer

A) Service Revenue 
B) Deferred Revenue 
C) Prepaid Revenue 
D) Accounts Payable

Question 8

Assuming that expenses exceed revenues,which of the following correctly indicates the structure of the journal entry that is used to close revenue and expense accounts?

Accepted Answer

A) Debit Retained Earnings,debit Expenses,and credit Revenues. 
B) Debit Revenues,debit Retained Earnings,and credit Expenses. 
C) Debit Revenues,debit Expenses,and credit Retained Earnings. 
D) Debit Expenses,credit Revenues,and credit Retained Earnings.

Question 9

A closing entry may include a:

Accepted Answer

A) debit to Deferred Revenue. 
B) credit to Interest Revenue. 
C) credit to Wages Expense. 
D) debit to Prepaid Insurance.

Question 10

On July 31,2018,a company purchased a two-year insurance policy for $27,000,paying cash and debiting Prepaid Insurance for the entire two-year premium amount.The adjusting entry on December 31,2018 includes a:

Accepted Answer

A) credit to Prepaid Insurance $5,625. 
B) credit to Insurance Expense $5,625. 
C) debit to Prepaid Insurance $6,750. 
D) debit to Insurance expense $6,750.

Question 11

To recognize the use of and benefit received from long-lived assets,such as equipment,during the accounting period,________ Expense should be recorded.

Accepted Answer

A) Depreciation 
B) Supplies 
C) Accumulated Depreciation 
D) Interest

Question 12

Freshly Co.purchased an investment security on September 1 that will pay $1,200 interest on November 30.Which of the following adjusting entries would be made on September 30?

Accepted Answer

A) Debit Interest Receivable and credit Interest Revenue for $1,200. 
B) Debit Interest Revenue and credit Interest Receivable for $400. 
C) Debit Interest Receivable and credit Interest Revenue for $400. 
D) Debit Interest Revenue and credit Interest Receivable for $1,200.

Question 13

Long-lived assets,such as equipment,are reported at their ________ value on the balance sheet.

Accepted Answer

A) fair market 
B) insurable 
C) carrying 
D) expected

Question 14

Which of the following appears on an adjusted trial balance?

Accepted Answer

A) The ending balance of Retained Earnings 
B) Dividends 
C) Gross profit 
D) Net income

Question 15

A company owes rent at a rate of $6,000 per month.The company pays the rent owed on the tenth of each month for the previous month.At the end of each month,what kind of adjustment is required?

Accepted Answer

A) An accrual adjustment. 
B) A closing adjustment. 
C) A deferral adjustment. 
D) No adjustment.

Question 16

How does the timing of adjusting entries differ from the accounting for daily transactions?

Accepted Answer

A) Adjustments are made at the discretion of management and are not necessary for each accounting period. 
B) Adjustments are made at the beginning of the accounting period to ensure accuracy is maintained during the cycle. 
C) Adjustments are made throughout the accounting period as information becomes available. 
D) Adjustments are made at the end of the accounting period because making them on a daily basis would be inefficient.

Question 17

The term deferral best describes a situation in which:

Accepted Answer

A) cash is paid in advance of recognizing an expense. 
B) an expense is recognized before it is paid for with cash. 
C) an expense is recognized after cash has been received. 
D) a liability is established at the time an expense is recognized.

Question 18

Panda Partners purchased $1,450 of app software that is estimated to have four years of usefulness.The adjusting entry to record the amortization includes a debit to ________ and a credit to ________.

Accepted Answer

A) Amortization Expense;Accumulated Amortization 
B) Accumulated Amortization;Amortization Expense 
C) Depreciation Expense;Accumulated Depreciation 
D) Accumulated Depreciation;Depreciation Expense 
E) Software;Amortization Expense

Question 19

When it paid its insurance in advance,a company recorded Prepaid Insurance.As of the end of the accounting year,the prepayment had expired.If no adjustment is made to record this expiration,which of the following will occur?

Accepted Answer

A) Assets will be understated and expenses will be overstated. 
B) Assets will be overstated and expenses will be understated. 
C) Assets and expenses will be overstated. 
D) Assets and expenses will be understated.

Question 20

Why is the balance in the Depreciation Expense account generally different from the balance in the Accumulated Depreciation account?

Accepted Answer

A) The adjusting entry contains a different amount for Depreciation Expense and Accumulated Depreciation. 
B) The Accumulated Depreciation account contains the value of the long-lived asset as well as the depreciation. 
C) Depreciation expense only reflects the current period depreciation.Accumulated Depreciation contains depreciation since the asset was purchased. 
D) The balances in the two accounts should be the same amount.

Exam 4: Adjustments,Financial Statements,and Financial Results