Question 1

Which of the following statements about the accrual basis of accounting is false:

Accepted Answer

A)   An expense is recognised in the period when the benefit deriving from the associated expenditure arises.
B)   The wages accrued account records the cost of work performed but not paid for at the end of the accounting period.
C)   Revenue is recognised when it is earned and certain.
D)   The accrual basis of accounting lies behind the concept of depreciating an asset as it is used.
E)   An expense is recognised in the period that it is paid for. E

Question 2

The following information relates to the next two questions. On 1S1U1P1stS1S1P0 December the Divine Hotel received a down payment of $30,000 for a 3 day conference that it will host 31S1U1P1stS1S1P0 December - 2S1U1P1ndS1S1P0 January.
-On 1st December, the Divine Hotel should record the down payment in its accounts as:

Accepted Answer

A)   Debit Revenue $30,000; Credit Unearned Revenue $30,000
B)   Debit Cash $30,000; Credit Conference Revenue $30,000
C)   Debit Cash $30,000; Credit Unearned Revenue $30,000
D)   Debit Cash $30,000; Credit Contingent Revenue $30,000
E)   None of the above C

Question 3

Jo Smith earned a salary of $540 for the last week of June. She is due to be paid for this work on 2nd July. The adjusting entry for Jo's employer at 30 June is:

Accepted Answer

A)   Debit Salaries Accrued $540; Credit Salaries Expense $540.
B)   Debit Salaries Expense $540; Credit Salaries Accrued $540.
C)   Debit Salaries Accrued $540; Credit Cash $540.
D)   Debit Salaries Expense $540; Credit Cash $540.
E)   None of the above. B

Question 4

The ABC company pays its salaried staff $40,000 every 10 working days (ie every 2 weeks). If the company's year end were to fall four working days following the last payment made to salaried employees, the following salaries adjusting entry would have to be made:

Accepted Answer

A)   Debit Salaries Prepaid $16,000; Credit Accrued Salaries $16,000
B)   Debit Salary Expense $16,000; Credit Accrued Salaries $16,000
C)   Debit Accrued Salaries $16,000; Credit Salary Expense $16,000
D)   Debit Accrued Salaries $16,000; Credit Salaries Prepaid $16,000
E)   None of the above.

Question 5

Which of the following accounts will have a zero balance following the completion of financial year end closing entries?

Accepted Answer

A)   Office supplies.
B)   Revenue.
C)   Prepaid rent.
D)   Unearned revenue.
E)   Accrued wages.

Question 6

Which of the following factors does not result in a need to make a financial year-end adjusting entry.

Accepted Answer

A)   Bad and doubtful accounts
B)   Depreciation
C)   Revenue earned but not yet received
D)   Dividend payments
E)   Expenses uncured but not paid for

Question 7

Which of the following accounts will have a zero balance following the completion of financial year end closing entries?

Accepted Answer

A)   Office supplies.
B)   Accumulated depreciation.
C)   Prepaid rent.
D)   Allowance for doubtful accounts.
E)   Depreciation expense.

Question 8

A year end balance on an accrued wages account is reported in the year end accounts as:

Accepted Answer

A)   A deduction in the profit and loss statement.
B)   A liability in the balance sheet.
C)   A prepaid expense.
D)   An asset in the balance sheet.
E)   None of the above.

Question 9

An inventory count conducted on 31st December 20X1 has determined that the Regal Hotel has a cleaning supplies inventory of $260. Accounting records indicate that the hotel had $140 of cleaning supplies at the commencement of the year and purchased $880 of cleaning supplies during the year. What amount should be expensed for cleaning supplies in the year ended 31st December 20X1?

Accepted Answer

A)   $760
B)   $1,280
C)   $1,020
D)   $880
E)   None of the above

Question 10

The Sea Breeze Hotel and Golf club operates a periodic inventory system in connection with its office supplies. Prior to the posting of its current financial year end adjusting entries, the office supplies account has a $200 debit balance and the office supplies purchases account has a debit balance of $1,100. A year end stock check has established that the hotel has $300 of office supplies on hand. What year end adjusting entry is required?

Accepted Answer

A)   Debit Supplies inventory $1,100; Credit Supplies purchases: $1,100Debit Supplies inventory $1,000; Credit Supplies expense $1,000.
B)   Debit Supplies purchases $1,100; Credit Supplies inventory: $1,100Debit Supplies inventory $1,000; Credit Supplies expense $1,000.
C)   Debit Supplies purchases $1,100; Credit Supplies inventory: $1,100Debit Supplies expense $1,000; Credit Supplies inventory $1,000.
D)   Debit Supplies inventory $1,100; Credit Supplies purchases: $1,100Debit Supplies expense $1,000; Credit Supplies inventory $1,000.
E)   None of the above

Question 11

With respect to the 'Accumulated Depreciation' account, which of the following statements is correct?

Accepted Answer

A)   It appears as a liability in the balance sheet.
B)   It reflects that part of an asset's cost that has been expensed.
C)   When deducted from an asset's original cost, it reflects what the asset is currently worth.
D)   It appears as an expense in the profit and loss statement.
E)   None of the above statements are correct.

Question 12

At the end of its financial year a company has an accounts receivable balance of $540,000 and an 'allowance for doubtful accounts' credit balance of $4,000. Following a review of the company's accounts receivable ledger, the auditor has determined that $3,000 should be provided for as doubtful accounts. The year end adjusting entry required is:

Accepted Answer

A)   Debit Sales account $3,000; Credit Accounts Receivable $3,000
B)   Debit Allowance for Doubtful Accounts $3,000; Credit Bad Debts expense $3,000.
C)   Debit Allowance for Doubtful Accounts $1,000; Credit Accounts Receivable $1,000.
D)   Debit Allowance for Doubtful Accounts $1,000; Credit Bad Debts expense $1,000.
E)   None of the above

Question 13

The Prima Hotel pays its waged staff $28,000 every 7 days. The hotel's year end falls 3 days into its 7 day wage payment cycle. The adjusting entry that it needs to make in connection with wages is:

Accepted Answer

A)   Debit Wages Prepaid $12,000; Credit Accrued Wages $12,000
B)   Debit Accrued Wages $12,000; Credit Wage Expense $12,000
C)   Debit Wage Expense $12,000; Credit Accrued Wages $12,000
D)   No adjusting entry required.
E)   None of the above.

Question 14

A hotel and country club bought a lawn mower on 1st January 2012 for $10,000. It has been estimated that the lawn mower will be sold off for a salvage value of $2,000 after four years. If the hotel uses the straight line depreciation method, what is the accounting entry to record the lawn mower's depreciation for the hotel's year ending 31 March 2012:

Accepted Answer

A)   Debit Accumulated Depreciation $625; Credit Depreciation Expense $625.
B)   Debit Depreciation Expense $625; Credit Accumulated Depreciation $625.
C)   Debit Depreciation Expense $500; Credit Accumulated Depreciation $500.
D)   Debit Accumulated Depreciation $500; Credit Depreciation Expense $500.
E)   None of the above.

Question 15

To provide for the possibility that a portion of a hotel's accounts receivable ledger may prove to be uncollectible, periodically, the following entry should be entered in the hotel's accounts.

Accepted Answer

A)   Debit Allowance for Doubtful Accounts; Credit Accounts Receivable
B)   Debit Bad Debts Expense; Credit Accounts Receivable
C)   Debit Bad Debts Expense; Credit Allowance for Doubtful Accounts
D)   Debit Allowance for Doubtful Accounts; Credit Sales
E)   None of the above

Question 16

The Upmarket Hotel has an interest yielding investment earning $18,000 per year. Its year end is 31st December. Indicate what adjusting entry is required if the last time that interest was received and recorded occurred on 31st October.

Accepted Answer

A)   Debit Interest Receivable $3,000; Credit Interest Revenue $3,000
B)   Debit Interest Revenue $3,000; Credit Interest Receivable $3,000
C)   Debit Unearned Interest $3,000; Credit Interest Revenue $3,000
D)   Debit Interest Receivable $3,000; Credit Unearned Interest $3,000
E)   None of the above

Question 17

On 1st May 2012 Byron Bay Events invested $72,000 in a term deposit earning 5% per annum. Its year end is 31st December 2012. Indicate what adjusting entry is required at 31st December.

Accepted Answer

A)   Debit Interest Receivable $2,400; Credit Unearned Revenue $2,400
B)   Debit Interest Revenue $2,400; Credit Interest Receivable $2,400
C)   Debit Cash $3,600; Credit Interest Revenue $3,600
D)   Debit Interest Receivable $2,400; Credit Interest Revenue $2,400
E)   Debit Interest Receivable $1,200; Credit Interest Revenue $1,200

Question 18

The Outward Bounds Tour Operating company made an annual insurance premium payment of
$2,400 on 1st November 2009. It recorded this payment by debiting its insurance expense
Account $2,400 and crediting its cash account $2,400. The insurance adjusting entry that will
Need to be made at its financial year end of 31 December 2009 is:

Accepted Answer

A)   Debit Insurance Expense $400; Credit Insurance Prepaid $400
B)   Debit Insurance Prepaid $2,000; Credit Insurance Expense $2,000
C)   Debit Insurance Expense $2,000; Credit Insurance Prepaid $2,000
D)   Debit Insurance Prepaid $400; Credit Insurance Prepaid $400
E)   None of the above

Question 19

The Excelsior hotel purchased a limousine costing $100,000 on 1 July 20X2. The limousine has an expected useful life of 8 years and it is estimated it will have a salvage value of $20,000. Assuming the hotel depreciates its fleet of vehicles using the straight line approach, what depreciation entry will be required for the limousine for the year ending 30 June 20X3 (assume no prior depreciation entries have been made for the limousine)?

Accepted Answer

A)   Debit Accumulated Depreciation $12,500; Credit Depreciation Expense $12,500
B)   Debit Depreciation Expense $10,000; Credit Accumulated Depreciation $10,000
C)   Debit Depreciation Expense $10,000; Credit Limousines $10,000
D)   Debit Accumulated Depreciation $10,000; Credit Depreciation Expense $10,000
E)   None of the above.

Question 20

The Iconic Hotel has an investment of $30,000 earning 6% interest per annum which is paid semi-annually. The last time the hotel updated its records with respect to this account was when it received an interest payment of $900 for the six months ended 31 December 2011. What adjusting entry should the hotel make for its 31 March 2012 financial year end with respect to this interest bearing account?

Accepted Answer

A)   Debit Interest Receivable $450; Credit Unearned Revenue $450.
B)   Debit Interest Receivable $450; Credit Interest Revenue $450.
C)   Debit Cash $450; Credit Interest Revenue $450.
D)   Debit Interest Revenue $450; Credit Interest Receivable $450.
E)   Debit Interest Revenue $1,800; Credit Interest Receivable $1,800.

Exam 4: Adjusting and Closing Entries

Which of the following statements about the accrual basis of accounting is false:

The following information relates to the next two questions. On 1^st December the Divine Hotel received a down payment of $30,000 for a 3 day conference that it will host 31^st December - 2^nd January. -On 1^st December, the Divine Hotel should record the down payment in its accounts as:

Jo Smith earned a salary of $540 for the last week of June. She is due to be paid for this work on 2^nd July. The adjusting entry for Jo's employer at 30 June is:

The ABC company pays its salaried staff $40,000 every 10 working days (ie every 2 weeks) . If the company's year end were to fall four working days following the last payment made to salaried employees, the following salaries adjusting entry would have to be made:

Which of the following accounts will have a zero balance following the completion of financial year end closing entries?

Which of the following factors does not result in a need to make a financial year-end adjusting entry.

Which of the following accounts will have a zero balance following the completion of financial year end closing entries?

A year end balance on an accrued wages account is reported in the year end accounts as:

With respect to the 'Accumulated Depreciation' account, which of the following statements is correct?

The Prima Hotel pays its waged staff $28,000 every 7 days. The hotel's year end falls 3 days into its 7 day wage payment cycle. The adjusting entry that it needs to make in connection with wages is:

To provide for the possibility that a portion of a hotel's accounts receivable ledger may prove to be uncollectible, periodically, the following entry should be entered in the hotel's accounts.

The Upmarket Hotel has an interest yielding investment earning $18,000 per year. Its year end is 31^st December. Indicate what adjusting entry is required if the last time that interest was received and recorded occurred on 31^st October.

On 1^st May 2012 Byron Bay Events invested $72,000 in a term deposit earning 5% per annum. Its year end is 31^st December 2012. Indicate what adjusting entry is required at 31^st December.

Exam 4: Adjusting and Closing Entries

Which of the following statements about the accrual basis of accounting is false:

The following information relates to the next two questions. On 1st December the Divine Hotel received a down payment of $30,000 for a 3 day conference that it will host 31st December - 2nd January. -On 1st December, the Divine Hotel should record the down payment in its accounts as:

Jo Smith earned a salary of $540 for the last week of June. She is due to be paid for this work on 2nd July. The adjusting entry for Jo's employer at 30 June is:

The ABC company pays its salaried staff $40,000 every 10 working days (ie every 2 weeks) . If the company's year end were to fall four working days following the last payment made to salaried employees, the following salaries adjusting entry would have to be made:

Which of the following accounts will have a zero balance following the completion of financial year end closing entries?

Which of the following factors does not result in a need to make a financial year-end adjusting entry.

Which of the following accounts will have a zero balance following the completion of financial year end closing entries?

A year end balance on an accrued wages account is reported in the year end accounts as:

With respect to the 'Accumulated Depreciation' account, which of the following statements is correct?

The Prima Hotel pays its waged staff $28,000 every 7 days. The hotel's year end falls 3 days into its 7 day wage payment cycle. The adjusting entry that it needs to make in connection with wages is:

To provide for the possibility that a portion of a hotel's accounts receivable ledger may prove to be uncollectible, periodically, the following entry should be entered in the hotel's accounts.

The Upmarket Hotel has an interest yielding investment earning $18,000 per year. Its year end is 31st December. Indicate what adjusting entry is required if the last time that interest was received and recorded occurred on 31st October.

On 1st May 2012 Byron Bay Events invested $72,000 in a term deposit earning 5% per annum. Its year end is 31st December 2012. Indicate what adjusting entry is required at 31st December.

The following information relates to the next two questions. On 1^st December the Divine Hotel received a down payment of $30,000 for a 3 day conference that it will host 31^st December - 2^nd January. -On 1^st December, the Divine Hotel should record the down payment in its accounts as:

Jo Smith earned a salary of $540 for the last week of June. She is due to be paid for this work on 2^nd July. The adjusting entry for Jo's employer at 30 June is:

The Upmarket Hotel has an interest yielding investment earning $18,000 per year. Its year end is 31^st December. Indicate what adjusting entry is required if the last time that interest was received and recorded occurred on 31^st October.

On 1^st May 2012 Byron Bay Events invested $72,000 in a term deposit earning 5% per annum. Its year end is 31^st December 2012. Indicate what adjusting entry is required at 31^st December.