Question 1

Which one of the following accounts would not be closed at the end of the accounting year?

Accepted Answer

A) Utilities expense. 
B) Sales revenue. 
C) Prepaid rent expense. 
D) Wages expense.

Question 2

What is the purpose of adjusting entries? Give two examples of accruals and deferrals.

Accepted Answer

The answer of What is the purpose of adjusting entries?...

Question 3

Bridge Company keeps a small inventory of supplies used for cleaning and maintenance purposes. On January 1, 2016, the inventory of supplies on hand was $2,000. During the year, supplies purchased were debited to the supplies account in the amount of $6,500. On December 31, 2016, the amount of supplies in the storeroom was $1,750. The books are adjusted only at year-end.
Required:
Prepare the adjusting entry required at December 31, 2016.

Accepted Answer

The answer of Bridge Company keeps a small inventory of...

Question 4

A calendar-year reporting company preparing its annual financial statements should use the phrase "At December 31, 2016" in the heading of which of the following?

Accepted Answer

A) On all of the required financial statements. 
B) On only the income statement. 
C) On the income statement and balance sheet, but not the statement of cash flows. 
D) On the balance sheet only.

Question 5

On December 1, 2016, Fleet Company paid $30,000 for three months rent and debited prepaid rent for $30,000; the payment was for rent beginning December 1, 2016.
Required:
Prepare Fleet's adjusting entry required on December 31, 2016.

Accepted Answer

The answer of On December 1, 2016, Fleet Company paid...

Question 6

On July 1, 2016, Bass Company paid a two-year insurance premium. On that date the following journal entry was made:
  
A.How much of the premium should be reported as expense on the 2016 income statement?
B.What is the amount of prepaid insurance that should be reported on the balance sheet at December 31, 2016?
C.Prepare the adjusting entry that should be made on December 31, 2016, assuming no adjusting entries have been made during the year.

Accepted Answer

The answer of On July 1, 2016, Bass Company paid...

Question 7

Which of the following correctly describes the following adjusting journal entry?

Accepted Answer

A) Total assets decrease and net income decreases. 
B) Stockholders' equity decreases and liabilities increase. 
C) The transaction is an example of a deferral. 
D) Net income decreases and stockholders' equity does not change.

Question 8

Top Company's 2016 sales revenue was $200,000 and 2015 sales revenue was $180,000. Top's total assets as of December 31, 2016 were $150,000 and total assets as of January 1, 2016 were $130,000. What is Top's total asset turnover ratio?

Accepted Answer

A) 1.48 
B) 1.33 
C) 1.36 
D) 1.43

Question 9

Which of the following correctly describes the effects of initially recording deferred revenue when cash is received from a customer?

Accepted Answer

A) Revenue is increased. 
B) Liabilities are not affected. 
C) Retained earnings increases. 
D) Net income is not affecteD.Deferred revenue recorded when cash is received from a customer increases the unearned revenue account and increases cash.These are balance sheet accounts that do not impact net income.

Question 10

Which of the following journal entries is created as the result of an accrual?

Accepted Answer

A)   
B)   
C)   
D)

Question 11

The adjusting entry to record accrued revenues results in an increase in assets and an increase in stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 12

On September 1, 2016, Fast Track, Inc. was started with $30,000 invested by the owners as contributed capital. On September 30, 2016, the accounting records contained the following amounts:  Required:
Prepare a balance sheet for Fast Track, Inc. as of September 30, 2016.

Accepted Answer

The answer of On September 1, 2016, Fast Track, Inc....

Question 13

Income statement accounts are temporary accounts because their balances are closed out at the end of the accounting year.

Accepted Answer

A) True 
 B)False

Question 14

On December 31, 2016, the manager of Jordan Creek Apartments noticed that four tenants had not paid their December rent amounting to $500 each. What is the adjusting entry required on December 31, 2016?

Accepted Answer

The answer of On December 31, 2016, the manager of...

Question 15

Closing the revenue and gain accounts at year-end requires that these accounts be debited.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following adjusting journal entries is created as the result of an accrual?

Accepted Answer

A)   
B)   
C)   
D)

Question 17

Closing the expense and loss accounts at year-end requires that these accounts be debited.

Accepted Answer

A) True 
 B)False

Question 18

On December 31, 2016, Krug Company prepared adjusting entries that included the following items: Depreciation expense: $31,000.
Accrued sales revenue: $29,000.
Accrued expenses: $12,000.
Used insurance: $9,000; the insurance was initially recorded as prepaid.
Rent revenue earned: $7,000; the rent was initially prepaid by the tenant and credited to unearned rent revenue.
If Krug Company reported pretax income of $120,000 prior to the adjusting entries, how much is Krug's pretax income after the adjusting entries?

Accepted Answer

A) $113,000. 
B) $104,000. 
C) $106,000. 
D) $128,000.

Question 19

Deferred expenses are initially recorded as assets and when they are later used, expenses will increase and assets will decrease.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is not a correct closing entry?

Accepted Answer

A)   
B)   
C)   
D)

Exam 4: Adjustments, Financial Statements, and the Quality of Earnings

Which one of the following accounts would not be closed at the end of the accounting year?

What is the purpose of adjusting entries? Give two examples of accruals and deferrals.

A calendar-year reporting company preparing its annual financial statements should use the phrase "At December 31, 2016" in the heading of which of the following?

On December 1, 2016, Fleet Company paid $30,000 for three months rent and debited prepaid rent for $30,000; the payment was for rent beginning December 1, 2016. Required: Prepare Fleet's adjusting entry required on December 31, 2016.

Which of the following correctly describes the following adjusting journal entry?

Top Company's 2016 sales revenue was $200,000 and 2015 sales revenue was $180,000. Top's total assets as of December 31, 2016 were $150,000 and total assets as of January 1, 2016 were $130,000. What is Top's total asset turnover ratio?

Which of the following correctly describes the effects of initially recording deferred revenue when cash is received from a customer?

Which of the following journal entries is created as the result of an accrual?

The adjusting entry to record accrued revenues results in an increase in assets and an increase in stockholders' equity.

On September 1, 2016, Fast Track, Inc. was started with $30,000 invested by the owners as contributed capital. On September 30, 2016, the accounting records contained the following amounts: Required: Prepare a balance sheet for Fast Track, Inc. as of September 30, 2016.

Income statement accounts are temporary accounts because their balances are closed out at the end of the accounting year.

On December 31, 2016, the manager of Jordan Creek Apartments noticed that four tenants had not paid their December rent amounting to $500 each. What is the adjusting entry required on December 31, 2016?

Closing the revenue and gain accounts at year-end requires that these accounts be debited.

Which of the following adjusting journal entries is created as the result of an accrual?

Closing the expense and loss accounts at year-end requires that these accounts be debited.

Deferred expenses are initially recorded as assets and when they are later used, expenses will increase and assets will decrease.

Which of the following is not a correct closing entry?