Question 1

The adjusted trial balance is used to prepare the financial statements for an organization.

Accepted Answer

The adjusted trial balance is a report that lists all the accounts of an organization with their adjusted balances, which are used to prepare the financial statements. Therefore, the statement is true.

Question 2

On January 1,the Thunderball Hockey Association sold 300 season passes for $200 each.The season lasts from February through May.If the amount received was credited to unearned revenue,what adjusting entry will be made on February 28?

Accepted Answer

The adjusting entry to be made on February 28th will be to recognize the revenue earned for the month of February, which is 1/4th of the season. Since the total season passes sold were 300, the revenue earned for February will be:

Revenue earned = (300 passes * $200 each) * 1/4 = $15,000

Since the amount was credited to unearned revenue initially, the adjusting entry will be to debit the unearned revenue account for $15,000 and credit the revenue account for $15,000.

Option A is incorrect because it suggests crediting the unearned revenue account instead of debiting it.
Option B is incorrect because it suggests recognizing only half of the revenue earned in February.
Option D is incorrect because it suggests recognizing the entire revenue of $60,000 instead of the portion earned in February.

Question 3

Thunderball Sports Club collected $325,000 from its clients during the year.If unearned revenue at the beginning of the year was $65,000 and revenue earned during the year was $340,000,what was unearned revenue at the end of the year?

Accepted Answer

The answer of Thunderball Sports Club collected $325,000 from its...

Question 4

True North Real Estate Management failed to adjust its Unearned Rent Revenue account for the $15,000 that had been earned during the current year.What effect does this omission have on the current year financial statements?

Accepted Answer

The omission means that the Unearned Rent Revenue, a liability, was not reduced by $15,000 to reflect the revenue earned. This results in liabilities being overstated.

Question 5

Which of the following errors would cause the adjusted trial balance to not balance?

Accepted Answer

The answer of Which of the following errors would cause...

Question 6

On November 1,Fisher and Sons Music Center loaned a customer $15,000 at 8% for six months.What is the interest receivable on the note at December 31?

Accepted Answer

Interest receivable = Principal x Rate x Time= $15,000 x 8% x 2/12= $15,000 x 0.08 x 0.1667= $200

Question 7

The adjusted trial balance proves the accuracy of the financial statements.

Accepted Answer

The answer of The adjusted trial balance proves the accuracy...

Question 8

Bay Meadows Real Estate collected rentals of $420,000 during the year.The beginning balance in its rent receivable account was $50,000 and its ending balance was $45,000.The beginning balance in unearned rent revenue was $25,000,and the ending balance was $15,000.What was total rent revenue for the year?

Accepted Answer

Total rent revenue can be calculated as:
Rent revenue collected + beginning rent receivable balance - ending rent receivable balance - beginning unearned rent revenue balance + ending unearned rent revenue balance
$420,000 + $50,000 - $45,000 - $25,000 + $15,000 = $415,000
Therefore, the total rent revenue for the year was $415,000, which is option B.

Question 9

Mattox Corporation had a unadjusted balance of $5,400 in Supplies.The actual balance was $150.The accountant failed to make the adjusting entry.What is the effect on the current year financial statements?

Accepted Answer

The failure to adjust the Supplies account means that the current assets are overstated by the difference between the unadjusted balance and the actual balance, which is $5,250 ($5,400 - $150).

Question 10

St.Augustine Properties collected advance rentals of $360,000 from its customers during the year.The balance in the unearned rent revenue account increased from $15,000 on January 1 to $35,000 on December 31.Rents earned during the year totaled ________.

Accepted Answer

The answer of St.Augustine Properties collected advance rentals of $360,000...

Question 11

Jackson Company records all insurance premiums as prepaid insurance.Additional information for the current year is presented below:  What was the total amount of insurance expense incurred during the year?

Accepted Answer

The answer of Jackson Company records all insurance premiums as...

Question 12

Olympic Equipment.borrowed $100,000 on November 1.The note matures in one year and the interest rate is 9%.What amount of interest expense will be accrued on December 31?

Accepted Answer

The answer of Olympic Equipment.borrowed $100,000 on November 1.The note...

Question 13

Wesley Foundation had $25,000 in supplies inventory at the beginning of the year.The company purchased $65,000 in supplies throughout the year and used $72,000.What is the ending balance in the supplies inventory?

Accepted Answer

Using the formula:
Ending Inventory = Beginning Inventory + Purchases - Cost of Goods Sold
We get:
Ending Inventory = $25,000 + $65,000 - $72,000
Ending Inventory = $18,000
Therefore, the ending balance in the supplies inventory is $18,000. Option D is the correct answer.

Question 14

Heartland Corporation records all insurance premiums as prepaid insurance.Additional information for the current year is presented below:  What were the total amount of insurance premiums paid during the year?

Accepted Answer

The answer of Heartland Corporation records all insurance premiums as...

Question 15

The first financial statement to be prepared from the adjusted trial balance is the Statement of Net Income.

Accepted Answer

The answer of The first financial statement to be prepared...

Question 16

The employees of Lucid Laboratories are paid every two weeks on Friday.Total payroll is $25,000 and covers 10 workdays.The end of the current month falls on Tuesday of the pay period.What is the adjusting journal entry to accrue payroll at the end of the month?

Accepted Answer

The answer of The employees of Lucid Laboratories are paid...

Question 17

Johnson Company neglected to accrue interest expense of $2,000 on its year-end trial balance.This results in a(n)________.

Accepted Answer

Neglecting to accrue interest expense will result in an understatement of expenses and an overstatement of net income, which can ultimately lead to an overstatement of shareholders' equity. Therefore, choice A is the correct answer.

Question 18

Selected transactions for Rosewood Industries are presented below.The fiscal year end for the company is April 30.Net income prior to these adjustments is $43,670.
a.The company had purchased a 2-year insurance policy for $2,400 on January 1 and debited the prepaid insurance account.
b.Depreciation on equipment for the month was $600.
c.The company borrowed $15,000 on February 1 at 12% interest.Principal and interest are due on February 1 of the following year.
d.The unadjusted trial balance showed a balance in Supplies of $2,650.A month-end inventory showed $900 on hand.
e.The company loaned $8,000 to a customer on April 1.The note has an annual interest rate of 12% and is due along with accrued interest on March 31 of the following year.
e.Employees had earned $5,600 in salaries as of April 30.These salaries will be paid on May 3.
f.The unadjusted trial balance showed unearned revenues of $7,200.During April,$1,200 of these revenues were earned.
Required:
1.Prepare the necessary adjusting entries for Rosewood Industries as of April 30.Please include explanations.
2.Compute net income after these adjustments have been made.

Accepted Answer

The answer of Selected transactions for Rosewood Industries are presented...

Question 19

The adjusted trial balance includes only permanent accounts.

Accepted Answer

The answer of The adjusted trial balance includes only permanent...

Question 20

Edmond Office Equipment borrowed $10,000 at 10% interest on July 1.Principal and interest are due on December 31.The company's fiscal year ends on October 31.What adjusting entry should be made on that date?

Accepted Answer

The adjusting entry should be made on October 31, which is the end of the fiscal year. Since the interest expense has been incurred for the period from July 1 to October 31, it needs to be recognized as an expense in the books of accounts. 
The interest expense for 4 months (July to October) can be calculated as:
Interest expense = Principal x Rate x Time = $10,000 x 10% x (4/12) = $333.33
Therefore, the adjusting entry on October 31 should be:
Interest Expense Dr. $333.33
Interest Payable Cr. $333.33 
Option C represents this entry, so it is the correct answer.

Quiz 4: Review of the Accounting Cycle