Question 1

The entry to adjust for the cost of supplies used during the accounting period is
A) debit Supplies Expense; credit Supplies
B) debit Stockholders' Equity; credit Supplies
C) debit Accounts Payable; credit Supplies
D) debit Supplies; credit Stockholders' Equity

Accepted Answer

When supplies are used during the accounting period, it is recorded as an expense, hence Supplies Expense account is debited. At the same time, the Supplies account is credited, as it is decreased due to supplies being used up.

Question 2

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

Accepted Answer

The Unearned Consulting Fees account represents revenue that has been collected in advance but has not yet been earned. Therefore, it is a liability account with a credit balance. Choice A is incorrect because revenue accounts normally have debit balances, not credit balances. Choice B is incorrect because expenses have debit balances, not credit balances. Choice D is incorrect because a liability account normally has a credit balance, not a debit balance.

Question 3

Smokey Company purchases a one-year insurance policy on July 1 for $3,600. The adjusting entry on December 31 is
A) debit Insurance Expense, $1,800; credit Prepaid Insurance, $1,800
B) debit Insurance Expense, $1,500; credit Prepaid Insurance, $1,500
C) debit Insurance Expense, $2,100; credit Prepaid Insurance, $2,100
D) debit Prepaid Insurance, $1,800; credit Cash, $1,800

Accepted Answer

The one-year insurance policy was purchased on July 1, meaning that half of the year has already passed by December 31. Therefore, the adjusting entry should reflect the amount of insurance that has been used up or expired, which is half of the total policy cost or $1,800. To record this, we need to debit Insurance Expense for $1,800 (an increase in expenses) and credit Prepaid Insurance for $1,800 (a decrease in assets). This will result in the correct amount of insurance expense being reported on the income statement and the correct amount of prepaid insurance being reported on the balance sheet.

Question 4

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 of systematically allocating the cost of fixed assets other than land is called depreciation. This is done in order to reflect the decrease in usefulness of these assets over time. Option A is not a widely used term, and options C and D do not specifically refer to the process of allocating fixed asset costs.

Question 5

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 remaining value of the asset after accounting for depreciation. This is different from historical cost, which is the initial cost of the asset, and contra asset, which is a separate account used to reduce the value of the asset on the balance sheet. Market value is the amount that the asset could be sold for in the current market.

Question 6

The adjusting entry to record the depreciation of a building for the fiscal period is
A) debit Depreciation Expense; credit Building.
B) debit Depreciation Expense; credit Accumulated Depreciation.
C) debit Accumulated Depreciation; credit Depreciation Expense.
D) debit Building; credit Depreciation Expense.

Accepted Answer

The adjusting entry to record the depreciation of a building for the fiscal period is to debit Depreciation Expense and credit Accumulated Depreciation. This entry correctly reflects the decrease in the value of the building over time and the increase in the value of the Accumulated Depreciation account, which is a contra-asset account that shows the total amount of depreciation taken on the asset to date. Option A is incorrect because you would not credit the building for depreciation since that would increase the asset's value. Option C is incorrect because Accumulated Depreciation is a contra-asset account, not an expense account. Option D is incorrect because debiting the building for depreciation would increase the asset's value, which is not correct.

Question 7

The cost of office supplies to be used in future periods is ordinarily shown on the balance sheet as an)
A) stockholders' equity
B) asset
C) contra asset
D) liability

Accepted Answer

The cost of office supplies to be used in future periods is considered an asset because it provides future economic benefits to the company. As the supplies are used up, they are expensed and shown as a reduction of the asset account on the balance sheet.

Question 8

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 credit to Supplies in the adjusting entry reflects the amount of supplies used during the period, as the entry adjusts the Supplies account to represent the current amount of supplies on hand by recognizing the expense of the supplies that have been consumed.

Question 9

Buster Industries pays weekly salaries of $30,000 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, $12,000; credit Cash, $12,000
B) debit Salary Expense, $12,000; credit Dividends, $12,000
C) debit Salary Expense, $12,000; credit Salaries Payable, $12,000
D) debit Dividends, $12,000; credit Cash, $12,000

Accepted Answer

The adjusting entry at the end of the fiscal period ending on Tuesday would be to record the salaries earned by the employees for the 2 days (Wednesday and Thursday) that have not yet been paid. Therefore, the company would need to debit Salary Expense and credit Salaries Payable for the amount of $12,000 ($30,000/5 days x 2 days = $12,000). Option A would be incorrect because it is recording a payment that has not been made yet. Option B would be incorrect because it is recording a payment as a dividend, which is not the correct account. Option D would be incorrect because it is recording a payment that has not been made yet and it is recording it as a dividend.

Question 10

Which of the following is the proper adjusting entry, based on a prepaid insurance account balance before adjustment of $14,000 and unexpired insurance of $3,000, for the fiscal year ending on April 30?
A) debit Insurance Expense, $3,000; credit Prepaid Insurance, $3,000
B) debit Insurance Expense, $14,000; credit Prepaid Insurance, $14,000
C) debit Prepaid Insurance, $11,000; credit Insurance Expense, $11,000
D) debit Insurance Expense, $11,000; credit Prepaid Insurance, $11,000

Accepted Answer

The proper adjusting entry would be to debit Insurance Expense for the amount of unexpired insurance, which is $3,000, and credit Prepaid Insurance for the same amount. This entry would decrease the Prepaid Insurance account to reflect only the amount of insurance that has not yet expired, and increase the Insurance Expense account to reflect the portion of insurance expense that has been incurred during the fiscal year. Therefore, the correct choice is D, which is "debit Insurance Expense, $11,000; credit Prepaid Insurance, $11,000".

Question 11

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

Accepted Answer

Accrued wages means that the company has incurred wages expense for work completed but has not yet paid those individuals. This requires a debit to Wages Expense (increasing the expense account) and a credit to Wages Payable (increasing the liability account). Therefore, option A is the correct choice.

Question 12

The supplies account has a balance of $4,400 at the beginning of the year and was debited during the year for $2,400, 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) $2,000
C) $6,800
D) $6,400

Accepted Answer

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

Question 13

The balance in the prepaid rent account before adjustment at the end of the year is $32,000, which represents four months' rent paid on December 1. The adjusting entry required on December 31 is
A) debit Rent Expense, $8,000; credit Prepaid Rent, $8,000
B) debit Prepaid Rent, $24,000; credit Rent Expense, $8,000
C) debit Rent Expense, $24,000; credit Prepaid Rent, $8,000
D) debit Prepaid Rent, $8,000; credit Rent Expense, $8,000

Accepted Answer

Since the $32,000 covers four months and only one month has passed by December 31, $8,000 (1/4 of $32,000) of the prepaid rent has been used. The adjusting entry should recognize this expense by debiting Rent Expense and crediting Prepaid Rent for $8,000.

Question 14

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 15

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

Accepted Answer

The entry to adjust the accounts for salaries accrued at the end of the accounting period is to debit Salaries Expense (to increase expenses) and credit Salaries Payable (to increase liabilities). Therefore, the correct entry is D) debit Salaries Expense; credit Salaries Payable. Options A and B are incorrect because they incorrectly mix up the debit and credit accounts. Option C is incorrect because it incorrectly suggests that the Salaries Expense account should be credited instead of debited.

Question 16

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

Accepted Answer

Accrued revenues represent revenue that has been earned but not yet received, so they are considered assets because they will be received in the future.

Question 17

The balance in the office supplies account on January 1 was $7,000, supplies purchased during January were $3,000, and the supplies on hand at January 30 were $2,000. The amount to be used for the appropriate adjusting entry is
A) $4,300
B) $12,000
C) $5,000
D) $8,000

Accepted Answer

The answer of The balance in the office supplies account...

Question 18

Gracie, Inc. made a prepaid rent payment of $2,800 on January 1. 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) $2,100
B) $700
C) $2,800
D) $1,400

Accepted Answer

Amount of prepaid rent that would appear on the January 31 balance sheet after adjustment = Prepaid rent payment on January 1 - Rent for January = $2,800 - $700 = $2,100

Question 19

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

Accepted Answer

Accumulated Depreciation is a contra asset account, meaning it is subtracted from the related asset account on the balance sheet. Depreciation Expense is an expense account on the income statement, representing the allocation of the cost of a long-term asset over its useful life. Therefore, the best choice is D, since Accumulated Depreciation is classified as a contra asset account and Depreciation Expense is classified as an expense account.

Question 20

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

Accepted Answer

Prepaid insurance is an asset as it represents an amount paid in advance for insurance coverage. Its normal balance is debit as an increase in prepaid insurance is recorded as a debit and a decrease is recorded as a credit.

Quiz 3: The Adjusting Process

The entry to adjust for the cost of supplies used during the accounting period is

The type of account and normal balance of Unearned Consulting Fees is

Smokey Company purchases a one-year insurance policy on July 1 for $3,600. The adjusting entry on December 31 is

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

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

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

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

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

Buster Industries pays weekly salaries of $30,000 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

Which of the following is the proper adjusting entry, based on a prepaid insurance account balance before adjustment of $14,000 and unexpired insurance of $3,000, for the fiscal year ending on April 30?

Data for an adjusting entry described as "accrued wages, $2,020" requires a

The balance in the prepaid rent account before adjustment at the end of the year is $32,000, which represents four months' rent paid on December 1. The adjusting entry required on December 31 is

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

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

Accrued revenues would appear on the balance sheet as

The balance in the office supplies account on January 1 was $7,000, supplies purchased during January were $3,000, and the supplies on hand at January 30 were $2,000. The amount to be used for the appropriate adjusting entry is

Gracie, Inc. made a prepaid rent payment of $2,800 on January 1. The company's monthly rent is $700. The amount of prepaid rent that would appear on the January 31 balance sheet after adjustment is

Accumulated Depreciation and Depreciation Expense are classified, respectively, as

The type of account and normal balance of Prepaid Insurance is