Question 1

The difference between the balance of a fixed asset account and the related accumulated depreciation account is termed
A)historical cost
B)contra asset
C)book value
D)market value

Accepted Answer

The difference between the balance of a fixed asset account and the related accumulated depreciation account is the book value, which represents the value of the asset that has not yet been depreciated. The historical cost is the original cost of the asset, the contra asset is an account used to offset the value of another asset, and market value is the current value of the asset if it were to be sold on the open market.

Question 2

Prepaid advertising,representing payment for the next quarter,would be reported on the balance sheet as a(n)
A)asset
B)liability
C)contra asset
D)expense

Accepted Answer

Prepaid advertising represents a future benefit to the company, therefore it is categorized as an asset on the balance sheet. It is an advance payment for advertising services that will be utilized in the future.

Question 3

A company purchases a one-year insurance policy on June 1 for $2,760.The adjusting entry on December 31 is
A)debit Insurance Expense,$1,380 and credit Prepaid Insurance,$1,380.
B)debit Insurance Expense,$1,150 and credit Prepaid Insurance,$1,150.
C)debit Insurance Expense,$1,610,and credit Prepaid Insurance,$1,610.
D)debit Prepaid Insurance,$1,380,and credit Cash,$1,380.

Accepted Answer

The answer of A company purchases a one-year insurance policy...

Question 4

Austin,Inc.made a Prepaid Rent payment of $3,500 on January 1st.The company's monthly rent is $700.The amount of Prepaid Rent that would appear on the January 31 balance sheet after adjustment is:
A)$2,800
B)$700
C)$3,500
D)$1,750

Accepted Answer

Since January has already passed, the prepaid rent account needs to be adjusted to reflect that only 5 months of rent remain. Therefore, the amount of prepaid rent that would appear on the January 31 balance sheet after adjustment is $2,800 ($3,500 - $700 x 5).

Question 5

The type of account and normal balance of Accumulated Depreciation is
A)asset,credit
B)asset,debit
C)contra asset,credit
D)contra asset,debit

Accepted Answer

Accumulated Depreciation is a contra asset account because it has a credit balance and reduces the overall value of the related asset on the balance sheet.

Question 6

The supplies account has a balance of $2,100 at the beginning of the year and was debited during the year for $2,300,representing the total of supplies purchased during the year.If $400 of supplies are on hand at the end of the year,the supplies expense to be reported on the income statement for the year is
A)$400
B)$200
C)$4,800
D)$4,000

Accepted Answer

The answer of The supplies account has a balance of...

Question 7

Supplies are recorded as assets when purchased.Therefore,the credit to supplies in the adjusting entry is for the amount of supplies
A)still on hand
B)purchased
C)used
D)required for the next accounting period

Accepted Answer

The answer of Supplies are recorded as assets when purchased.Therefore,the...

Question 8

The entry to adjust the accounts for wages accrued at the end of the accounting period is
A)debit Wages Payable;credit Wages Income
B)debit Wages Income;credit Wages Payable
C)debit Wages Payable;credit Wages Expense
D)debit Wages Expense;credit Wages Payable

Accepted Answer

The entry to adjust the accounts for wages accrued at the end of the accounting period is to debit Wages Expense (as the expense was incurred in the current period but payment will be made in the future) and credit Wages Payable (as the liability has been incurred but not yet paid).

Question 9

The type of account and normal balance of Unearned Rent is
A)revenue,credit
B)expense,debit
C)liability,credit
D)liability,debit

Accepted Answer

Unearned Rent is a liability account, because it represents rent that has been collected in advance but has not yet been earned. The normal balance for a liability account is a credit balance, because the account represents a debt or obligation owed by the company to another party.

Question 10

Which of the following is an example of a prepaid expense?
A)Supplies
B)Accounts Receivable
C)Unearned Subscriptions
D)Unearned Fees

Accepted Answer

The answer of Which of the following is an example...

Question 11

Data for an adjusting entry described as "accrued wages,$2,020" would result in
A)a debit to Wages Expense and a credit to Wages Payable
B)a debit to Wages Payable and a credit to Wages Expense
C)a debit to Accounts Receivable and a credit Wages Expense
D)a debit to Dividends and a credit to Wages Payable

Accepted Answer

Accrued wages means that the company owes employees for work that has been performed but not yet paid for. This results in an increase in Wages Expense (debit) and an increase in Wages Payable (credit) to reflect the liability to pay the employees.

Question 12

A business pays weekly salaries of $25,000 on Friday for a five-day week ending on that day.The adjusting entry necessary at the end of the fiscal period ending on Tuesday is
A)debit Salaries Payable,$10,000;credit Cash,$10,000
B)debit Salary Expense,$10,000;credit Dividends,$10,000
C)debit Salary Expense,$10,000;credit Salaries Payable,$10,000
D)debit Dividends,$10,000;credit Cash,$10,000

Accepted Answer

The business pays weekly salaries on Friday, but the fiscal period ends on Tuesday. Therefore, at the end of the fiscal period, the business needs to accrue the salary expense that has been incurred but not yet paid. The adjusting entry should be a debit to Salary Expense and a credit to Salaries Payable for the amount of the salaries earned by the employees for the two days (Saturday and Tuesday) that fall within the fiscal period but have not yet been paid. Option A would be correct if the fiscal period ended on Friday, but not on Tuesday. Option B is incorrect because dividends are not related to salaries. Option D is incorrect because dividends are not related to salaries and the business did not pay any dividends in this scenario.

Question 13

Accrued revenues would appear on the balance sheet as
A)assets
B)liabilities
C)equity
D)prepaid expenses

Accepted Answer

Accrued revenues represent revenue that has been earned but not yet received, meaning it is an asset to the company. Therefore, it would appear on the balance sheet as an asset.

Question 14

If there is a balance in the unearned subscriptions account after adjusting entries are made,it represents a(n)
A)deferral
B)accrual
C)dividend
D)revenue

Accepted Answer

A balance in the unearned subscriptions account after adjusting entries represents a deferral because the revenue has been received but the service has not yet been provided. This means that the revenue cannot be recognized until the service is provided, which requires adjusting the account balance.

Question 15

As time passes,fixed assets other than land lose their capacity to provide useful services.To account for this decrease in usefulness,the cost of fixed assets is systematically allocated to expense through a process called
A)equipment allocation
B)depreciation
C)accumulation
D)matching

Accepted Answer

The process described in the question is depreciation. Depreciation is the systematic allocation of the cost of a fixed asset, other than land, to expense over the asset's useful life. It recognizes the fact that fixed assets lose their capacity to provide useful services over time due to factors such as wear and tear, obsolescence, and deterioration. Depreciation helps to match the cost of using the asset to the revenues it generates, and is therefore an important concept in financial accounting. Choices A), C), and D) are not accurate descriptions of the process being discussed.

Question 16

If there is a balance in the prepaid rent account after adjusting entries are made,it represents a(n)
A)deferral
B)accrual
C)revenue
D)liability

Accepted Answer

If there is a balance in the prepaid rent account after adjusting entries are made, it represents a deferral, meaning that the rent payment was made in advance and needs to be recognized as an expense in the appropriate periods. It does not represent an accrual, revenue, or a liability.

Question 17

Depreciation Expense and Accumulated Depreciation are classified,respectively,as
A)expense,contra asset
B)asset,contra liability
C)revenue,asset
D)contra asset,expense

Accepted Answer

Depreciation expense is an expense account that reflects the cost of using a long-term asset. Accumulated depreciation is a contra asset account that offsets the balance of a related asset account. Therefore, the correct classifications are A) expense, contra asset.

Question 18

The adjusting entry to record the depreciation of equipment for the fiscal period is
A)debit Depreciation Expense;credit Equipment
B)debit Depreciation Expense;credit Accumulated Depreciation
C)debit Accumulated Depreciation;credit Depreciation Expense
D)debit Equipment;credit Depreciation Expense

Accepted Answer

Depreciation is the systematic allocation of the cost of the asset over its useful life. According to the matching principle, depreciation expense should be recognized in the same period as the revenue is earned from the use of the equipment. The adjusting entry to record depreciation is to debit Depreciation Expense and credit Accumulated Depreciation. This increases the expense and reduces the value of the asset on the balance sheet. Option A is incorrect because it decreases the value of the asset without increasing the expense. Option C is incorrect because it records the entry in reverse order. Option D is incorrect because it increases the value of the asset instead of reducing it.

Question 19

The cost of office supplies to be used in future periods is ordinarily shown on the balance sheet as a(n)
A)expense
B)asset
C)contra asset
D)liability

Accepted Answer

Office supplies that are to be used in future periods are considered assets because they will provide economic benefits to the company in the future. These supplies are recorded as a current asset on the balance sheet until they are used or consumed.

Question 20

The unexpired insurance at the end of the fiscal period represents
A)an accrued asset
B)an accrued liability
C)an accrued expense
D)a deferred expense

Accepted Answer

The unexpired insurance at the end of the fiscal period represents a deferred expense because it is an expense that has been paid in advance and has not yet been used up or expired. As time passes, the amount of unexpired insurance decreases and the amount of expired insurance increases, resulting in a reduction of the deferred expense and an increase in the insurance expense for the period.

Quiz 3: The Adjusting Process

The difference between the balance of a fixed asset account and the related accumulated depreciation account is termed

Prepaid advertising,representing payment for the next quarter,would be reported on the balance sheet as a(n)

A company purchases a one-year insurance policy on June 1 for $2,760.The adjusting entry on December 31 is

Austin,Inc.made a Prepaid Rent payment of $3,500 on January 1st.The company's monthly rent is $700.The amount of Prepaid Rent that would appear on the January 31 balance sheet after adjustment is:

The type of account and normal balance of Accumulated Depreciation is

Supplies are recorded as assets when purchased.Therefore,the credit to supplies in the adjusting entry is for the amount of supplies

The entry to adjust the accounts for wages accrued at the end of the accounting period is

The type of account and normal balance of Unearned Rent is

Which of the following is an example of a prepaid expense?

Data for an adjusting entry described as "accrued wages,$2,020" would result in

A business pays weekly salaries of $25,000 on Friday for a five-day week ending on that day.The adjusting entry necessary at the end of the fiscal period ending on Tuesday is

Accrued revenues would appear on the balance sheet as

If there is a balance in the unearned subscriptions account after adjusting entries are made,it represents a(n)

As time passes,fixed assets other than land lose their capacity to provide useful services.To account for this decrease in usefulness,the cost of fixed assets is systematically allocated to expense through a process called

If there is a balance in the prepaid rent account after adjusting entries are made,it represents a(n)

Depreciation Expense and Accumulated Depreciation are classified,respectively,as

The adjusting entry to record the depreciation of equipment for the fiscal period is

The cost of office supplies to be used in future periods is ordinarily shown on the balance sheet as a(n)

The unexpired insurance at the end of the fiscal period represents