Question 1

Which of the following will have a direct affect on the Statement of owner's equity?

Accepted Answer

Withdrawing money from the business will decrease the owner's equity, thereby affecting the Statement of owner's equity directly. The other options will affect the income statement and balance sheet indirectly but not the Statement of owner's equity.

Question 2

Depreciation Expense would be found on which of the following financial statements?

Accepted Answer

Depreciation Expense is an expense and would be included in the Income Statement.

Question 3

Ending capital is found by taking the beginning capital and adding the net income and withdrawals.

Accepted Answer

Ending capital is found by taking the beginning capital, adding the net income, and subtracting the withdrawals.

Question 4

On the formal income statement, the left column is the debit column, and the right column is the credit column.

Accepted Answer

On the formal income statement, the left column is typically the credit column and the right column is the debit column.

Question 5

Journal entries that are needed in order to update account balances for internal business transactions (such as supplies and prepaid rent) at the end of the period are called

Accepted Answer

Adjusting entries are made at the end of an accounting period in order to update account balances for internal business transactions such as supplies and prepaid rent. Closing entries, on the other hand, are made at the end of an accounting period in order to transfer net income or loss to retained earnings and reset revenue, expense, and dividend accounts to zero for the next accounting period. Sales entries would only be used to record sales transactions, so they are not applicable in this context. Therefore, the best choice is B.

Question 6

Fred's Plumbing Service purchased tools for $4,000. They have an expected life of 40 months and no residual value. The adjusting journal entry for the month is

Accepted Answer

The adjusting entry for depreciation should debit Depreciation Expense and credit Accumulated Depreciation. Option A is incorrect because it does not credit Accumulated Depreciation, which would result in the book value of the equipment not being reduced. Option C is also incorrect because it debits Accumulated Depreciation, which is a contra-asset account and therefore needs to be credited to increase its balance. Option D is incorrect because it credits Equipment, which is an asset account that should not be credited for depreciation.

Question 7

The adjusting entry for accrued salaries is to

Accepted Answer

When salaries are earned by employees, but have not yet been paid, they are accrued salaries. The adjusting entry for accrued salaries is to debit Salaries Expense (increasing expense) and credit Salaries Payable (creating a liability for the unpaid salaries). Therefore, the correct choice is A. The other choices are incorrect because they either do not account for the liability or debit/credit the wrong accounts.

Question 8

Debits must equal credits on the Statement of Owner's equity.

Accepted Answer

The Statement of Owner's Equity summarizes changes in equity for a period, focusing on investments, withdrawals, and net income or loss, not on the debit and credit balance equality which is a requirement for the balance sheet and general ledger.

Question 9

Adjusting journal entries

Accepted Answer

Adjusting journal entries must be journalized and posted to update the accounts before preparing the financial statements. The worksheet is just a tool to organize the adjusting entries and facilitate the preparation of the financial statements, but it is not a substitute for journalizing and posting the adjustments to the accounts. Closing entries are a separate set of entries prepared after the financial statements have been completed, and they aim to reset the temporary accounts to zero at the end of the fiscal period. They do not replace the need for adjusting journal entries.

Question 10

Benjamin's Lawn Service depreciation for the month is $800. The adjusting journal entry is

Accepted Answer

The adjusting entry for depreciation expense should increase the expense account (Depreciation Expense) and decrease the asset account (Accumulated Depreciation). Option B correctly represents this by debiting Depreciation Expense for $800 and crediting Accumulated Depreciation for $800. Options A, C, and D either incorrectly increase an asset account or decrease an expense account.

Question 11

Every amount needed for the income statement can be found on the worksheet.

Accepted Answer

The worksheet is a tool used to prepare the income statement. It contains all the information needed to calculate the amounts for the income statement, including revenues, expenses, gains, and losses.

Question 12

The adjusting entry to record depreciation for the company automobile would be

Accepted Answer

Depreciation is the process of allocating the cost of a long-term asset over its useful life. In this case, the company automobile is a long-term asset that will lose its value over time.

To record the depreciation for the company automobile, we need to debit Depreciation Expense, Automobile and credit Accumulated Depreciation, Automobile. This entry reduces the value of the asset on the balance sheet and recognizes the expense on the income statement.

Option A is incorrect because it credits Depreciation Expense, Automobile instead of debiting it. 
Option B is incorrect because it credits Automobile, which is not a contra-asset account. 
Option D is incorrect because it only credits Automobile, which would not recognize the expense on the income statement.

Question 13

Which of the following is prepared last?

Accepted Answer

The balance sheet is prepared last after all the other financial statements have been completed. It shows the company's financial position at a specific point in time by listing its assets, liabilities, and owner's equity.

Question 14

Each adjustment affects

Accepted Answer

Adjustments typically affect both the income statement (by adjusting revenues and expenses) and the balance sheet (by adjusting assets, liabilities, and equity). Adjustments may not necessarily have a direct impact on the cash account.

Question 15

The ending figure for capital is

Accepted Answer

The answer of The ending figure for capital is
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Question 16

Determine the ending owner's equity of a business having a beginning owner's equity of $15,200, withdrawals of $2,420, and net income of $16,500.

Accepted Answer

The answer of Determine the ending owner's equity of a...

Question 17

Which of the following will have a direct affect on the income statement?

Accepted Answer

Selling goods on account will result in revenue being recognized on the income statement.

Question 18

Every amount needed for the balance sheet can be found on the worksheet.

Accepted Answer

The worksheet is a tool used for planning and adjustments, containing information to prepare financial statements, but not all amounts needed for the balance sheet are directly found on it. Some amounts may require additional calculations or adjustments not detailed on the worksheet.

Question 19

The adjusting entry to record the expired rent would be to

Accepted Answer

The adjusting entry for expired rent would decrease the asset account Prepaid Rent and increase the expense account Rent Expense. Therefore, the correct entry would be to debit Rent Expense and credit Prepaid Rent.

Question 20

Every amount needed for the Statement of owner's equity can be found on the worksheet.

Accepted Answer

The Statement of Owner's Equity requires information not only from the worksheet, such as the beginning owner's equity and additional investments or withdrawals by the owner, but also from other sources like the income statement for net income or loss.

Quiz 4: The Accounting Cycle Continued: Preparing Worksheets and Financial Statements