Question 1

In the case of a deferred expense,the adjusting entry required at the end of a period will consist of a credit to the Prepaid Expense account.Assume the deferred expense was initially recorded as an asset.

Accepted Answer

When a deferred expense is initially recorded as an asset, it is recognized as a debit to the Prepaid Expense account. At the end of the period, an adjusting entry is required to recognize the expense and reduce the prepaid amount. This entry consists of a debit to an expense account and a credit to the Prepaid Expense account.

Question 2

A contra account's normal balance (debit or credit)is the opposite of the normal balance of the related account.

Accepted Answer

This is correct. Contra accounts have a normal balance that is opposite to the normal balance of the related account. For example, the contra account "Allowance for Doubtful Accounts" has a credit normal balance, while the related account "Accounts Receivable" has a debit normal balance.

Question 3

Harvard Financial Services purchased computers that are to be used in its consultancy services.Based on the matching principle,what account,other than Computers,should appear on the balance sheet as of December 31,2016?
A)Depreciation Expense
B)Service Revenue
C)Accumulated Depreciation
D)Equipment Expense

Accepted Answer

According to the matching principle, the cost of the computers should be matched with the revenue they generate over their useful life. This means that the cost of the computers should be recognized as an expense over time through depreciation. The accumulated depreciation account is used to record the total of all depreciation expense recognized to date. Therefore, option C) Accumulated Depreciation is the correct choice as it reflects the decreasing value of the asset as it is used over time. None of the other options are relevant in this situation, as there is no mention of equipment expense, service revenue or other accounts related to the acquisition of the computers.

Question 4

Holland Company purchased manufacturing equipment for $10,920.It has an estimated useful life of seven years and no residual value.The company should record depreciation expense of $80 per month.(Assume that the company uses the straight-line method. )

Accepted Answer

Depreciation Expense per month = ($10,920 / 7)/ 12 = $130

Question 5

On January 1,Ogden Company had $1,500 of supplies on hand.During January,Ogden purchased $5,500 worth of new supplies.At the end of the month,a count revealed $600 worth of supplies remaining on the shelves.The adjusting entry needed will include a debit to Supplies Expense of $6,400.The supplies were initially recorded as an asset.

Accepted Answer

Supplies Expense = $1,500 + $5,500 - $600 = $6,400

Question 6

In the case of a deferred expense,the adjusting entry required at the end of a period will consist of a debit to the Prepaid Expense account.Assume the deferred expense was initially recorded as an asset.

Accepted Answer

The adjusting entry for a deferred expense typically involves a debit to an expense account (reflecting the expense now incurred) and a credit to the Prepaid Expense account (reducing the asset as it is used up).

Question 7

A company received $5,000 for 100 one-year subscriptions on July 1.The journal entry to record this cash receipt would include a ________.The company uses a liability account for revenue received in advance.
A)credit to Accounts Payable for $5,000
B)debit to Prepaid Expenses for $5,000
C)credit to Unearned Revenue for $5,000
D)debit to Note Payable for $5,000

Accepted Answer

The company received revenue in advance, so it should credit the liability account for unearned revenue. Option A is incorrect because Accounts Payable is a liability account used for purchases made on credit, not for revenue. Option B is incorrect because Prepaid Expenses is an asset account used to record payments made in advance for goods or services. Option D is incorrect because Note Payable is a liability account used to record loans received, not revenue received.

Question 8

On January 1,2016,Prepaid Insurance of Maywood Company had a beginning balance of $900.Three months of insurance premiums remain in the beginning balance.On February 1,2016,the company paid an annual insurance premium in the amount of $3,400 for the period beginning April 1.On February 28,2016,the balance in Prepaid Insurance is $600.The deferred expense was initially recorded as an asset.

Accepted Answer

Insurance premium per month = $900 / 3 = $300
Balance in Prepaid Insurance as of 11ea8a42_4f1e_bb6b_8b44_a3cbf96879ae_TB5024_00

Question 9

The asset account,Office Supplies had a beginning balance of $5,400.During the accounting period,office supplies were purchased,on account,for $5,400.A physical count,on the last day of the accounting period,shows $2,300 of office supplies on hand.What is the amount of Supplies Expense for the accounting period?
A)$5,400
B)$2,300
C)$8,500
D)$3,100

Accepted Answer

C)
Office Supplies:
 11ea8a42_4f1f_098e_8b44_4dbda79691fe_TB5024_00

Question 10

On December 31,2016,the balance in Pinnacle Exploration Company's Unearned Revenue account was a credit of $6,000.In January,2017,the company received an advance payment of $14,000 from a new customer for services to be performed.By January 31,adjustments were made to recognize $4,000 of the revenue that had been earned during January.What was the balance in Unearned Revenue on January 31,2017?
A)$4,000 credit
B)$14,000 debit
C)$6,000 credit
D)$16,000 credit

Accepted Answer

D)
 11ea8a42_4f1e_6d48_8b44_978f97ac594c_TB5024_00

Question 11

Unearned Revenue is a(n)________ account and carries a normal ________ balance.
A)liability;credit
B)asset;credit
C)revenue;debit
D)asset;debit

Accepted Answer

Unearned Revenue is a liability account as it represents the money received in advance for services or goods not yet delivered. As it represents money owed to the customer, it has a credit balance.

Question 12

Prepaid Rent is an expense account that appears on the income statement.

Accepted Answer

Prepaid Rent is an asset account, not an expense account. It appears on the balance sheet, not the income statement. As rent is used up over time, it is gradually transferred from the Prepaid Rent account to Rent Expense on the income statement, reducing the asset and increasing the expense.

Question 13

Contra asset accounts,such as Accumulated Depreciation,always have normal debit balances.

Accepted Answer

Contra asset accounts, such as Accumulated Depreciation, always have normal credit balances.

Question 14

The following Office Supplies account information is available for Able Company:

From the above information,calculate the amount of office supplies purchased.
A)$7,800
B)$6,000
C)$1,200
D)$3,000

Accepted Answer

A)
Office Supplies:
 11ea8a42_4f1e_e27d_8b44_67875df2a18c_TB5024_00

Question 15

Explore,a travel magazine,collected $500,000 in subscription revenue in May.Each subscriber will receive an issue of the magazine for each of the next 12 months,beginning with the June issue.The company uses the accrual method of accounting.Provide the journal entry for collection of cash in May.(Ignore explanation. )Assume the magazine initially records a liability for the subscription revenue.

Accepted Answer

The answer of Explore,a travel magazine,collected $500,000 in subscription revenue...

Question 16

At Sea,a cruise industry magazine,collected $480,000 in subscription revenue in May.Each subscriber will receive an issue of the magazine for each of the next 12 months,beginning with the June issue.The company uses the accrual basis of accounting.Provide the adjusting entry needed on June 30.(Ignore explanation. )Assume the magazine initially records a liability for the subscription revenue.

Accepted Answer

The answer of At Sea,a cruise industry magazine,collected $480,000 in...

Question 17

The sum of all the depreciation expenses recorded to date for a depreciable asset is called residual value.

Accepted Answer

Residual value is the estimated value of a depreciable asset at the end of its useful life, not the sum of depreciation expenses recorded to date.

Question 18

The depreciation method that allocates an equal amount of depreciation each year is called the straight-line method.

Accepted Answer

This statement is correct. The straight-line method of depreciation allocates an equal amount of depreciation expense each year over the useful life of the asset.

Question 19

Prepaid Insurance is an asset account that appears on the balance sheet.

Accepted Answer

Prepaid Insurance is considered an asset because it represents an amount that has already been paid for but has not yet been used. It will eventually be used as an expense over time, but until then it remains an asset on the balance sheet.

Question 20

Kittery Services purchased computers that are to be used in its consultancy services.Based on the matching principle,the related account that should appear on the income statement for the year ended December 31,2016 is ________.
A)Depreciation Expense
B)Service Revenue
C)Accumulated Depreciation
D)Equipment Expense

Accepted Answer

According to the matching principle, expenses should be recognized in the same period as the revenue they helped to generate. In this case, since the computers were purchased for use in consultancy services, they will most likely generate revenue over several years. To match the cost of the computers with the revenue they help generate, the cost of the computers should be recognized over their useful lives as Depreciation Expense on the income statement.

Quiz 3: The Adjusting Process

In the case of a deferred expense,the adjusting entry required at the end of a period will consist of a credit to the Prepaid Expense account.Assume the deferred expense was initially recorded as an asset.

A contra account's normal balance (debit or credit)is the opposite of the normal balance of the related account.

Harvard Financial Services purchased computers that are to be used in its consultancy services.Based on the matching principle,what account,other than Computers,should appear on the balance sheet as of December 31,2016?

Holland Company purchased manufacturing equipment for $10,920.It has an estimated useful life of seven years and no residual value.The company should record depreciation expense of $80 per month.(Assume that the company uses the straight-line method. )

In the case of a deferred expense,the adjusting entry required at the end of a period will consist of a debit to the Prepaid Expense account.Assume the deferred expense was initially recorded as an asset.

A company received $5,000 for 100 one-year subscriptions on July 1.The journal entry to record this cash receipt would include a ________.The company uses a liability account for revenue received in advance.

Unearned Revenue is a(n) account and carries a normal balance.

Prepaid Rent is an expense account that appears on the income statement.

Contra asset accounts,such as Accumulated Depreciation,always have normal debit balances.

The following Office Supplies account information is available for Able Company: From the above information,calculate the amount of office supplies purchased.

The sum of all the depreciation expenses recorded to date for a depreciable asset is called residual value.

The depreciation method that allocates an equal amount of depreciation each year is called the straight-line method.

Prepaid Insurance is an asset account that appears on the balance sheet.

Kittery Services purchased computers that are to be used in its consultancy services.Based on the matching principle,the related account that should appear on the income statement for the year ended December 31,2016 is ________.

Quiz 3: The Adjusting Process

In the case of a deferred expense,the adjusting entry required at the end of a period will consist of a credit to the Prepaid Expense account.Assume the deferred expense was initially recorded as an asset.

A contra account's normal balance (debit or credit)is the opposite of the normal balance of the related account.

Harvard Financial Services purchased computers that are to be used in its consultancy services.Based on the matching principle,what account,other than Computers,should appear on the balance sheet as of December 31,2016?

Holland Company purchased manufacturing equipment for $10,920.It has an estimated useful life of seven years and no residual value.The company should record depreciation expense of $80 per month.(Assume that the company uses the straight-line method. )

In the case of a deferred expense,the adjusting entry required at the end of a period will consist of a debit to the Prepaid Expense account.Assume the deferred expense was initially recorded as an asset.

A company received $5,000 for 100 one-year subscriptions on July 1.The journal entry to record this cash receipt would include a ________.The company uses a liability account for revenue received in advance.

Unearned Revenue is a(n) ________ account and carries a normal ________ balance.

Prepaid Rent is an expense account that appears on the income statement.

Contra asset accounts,such as Accumulated Depreciation,always have normal debit balances.

The following Office Supplies account information is available for Able Company: From the above information,calculate the amount of office supplies purchased.

The sum of all the depreciation expenses recorded to date for a depreciable asset is called residual value.

The depreciation method that allocates an equal amount of depreciation each year is called the straight-line method.

Prepaid Insurance is an asset account that appears on the balance sheet.

Kittery Services purchased computers that are to be used in its consultancy services.Based on the matching principle,the related account that should appear on the income statement for the year ended December 31,2016 is ________.

Unearned Revenue is a(n) account and carries a normal balance.