Question 1

A business hired a repairman to overhaul its plumbing system.The repairman began work on September 15 and completed it on October 15.The business agreed to pay him $4,000 when the work was completed.As of September 30,the work was 50% complete and the business made an adjusting entry to accrue repair expense as of the end of September.On October 15,the work was completed and the repairman was paid in full.Provide the journal entry for the cash payment on October 15.(Ignore explanation)

Accepted Answer

The answer of A business hired a repairman to overhaul...

Question 2

Luminous Electrical Inc.performed services costing $8,000 on January 24 and invoiced the customer.Luminous received the $8,000 on January 31.Provide the journal entry on January 31 when the cash was received.(Ignore explanation.)

Accepted Answer

The answer of Luminous Electrical Inc.performed services costing $8,000 on...

Question 3

Deborah Consultants had the following balances before preparing adjusting entries in the books on December 31,2015.
  Prepare the adjusted trial balance after considering these adjustments:
a.Office Supplies used,$800.Assume the office supplies were initially recorded as an asset.
b.Accrued salaries on December 31,$600.
c.Revenue accrued but not recorded,$200.

Accepted Answer

The answer of Deborah Consultants had the following balances before...

Question 4

A business hired a repairman to overhaul its plumbing system.The repairman began work on September 15 and intends to complete it on October 15.The business will pay him $4,000 when the work is completed.As of September 30,the work was 50% complete.Provide the adjusting entry to accrue repair expense by the end of September.(Ignore explanation)

Accepted Answer

The answer of A business hired a repairman to overhaul...

Question 5

Ursula Tax Planning Service has the following plant assets: Communications equipment: Cost,$6,720 with useful life of 8 years; Furniture: Cost,$18,000 with useful life of 12 years; and Computer: Cost,$12,000 with useful life of 4 years.Assume the salvage value of all the assets is zero and the straight-line method is used. Ursula's monthly depreciation journal entry will include a ________.

Accepted Answer

The answer of Ursula Tax Planning Service has the following...

Question 6

Deborah Consultants had the following accounts and account balances after adjusting entries.Assume all accounts have normal balances.Calculate the amount of service revenue and prepare the adjusted trial balance for Deborah Consultants as of December 31,2015.

Accepted Answer

The answer of Deborah Consultants had the following accounts and...

Question 7

Healthy Living,a diet 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 Healthy Living,a diet magazine,collected $500,000 in subscription...

Question 8

Ursula Tax Planning Service has the following plant assets: Communications equipment: Cost,$6,720 with useful life of 8 years; Furniture: Cost,$18,000 with useful life of 12 years; and Computer: Cost,$12,000 with useful life of 4 years.(Assume salvage value of all the assets to be zero.)Ursula's monthly depreciation expense calculated using the straight-line method is ________.

Accepted Answer

To calculate depreciation expense using the straight-line method, we take the cost of the asset and divide it by the useful life. 
For communications equipment: 
Depreciation expense per year = $6,720/8 = $840
Depreciation expense per month = $840/12 = $70

For furniture: 
Depreciation expense per year = $18,000/12 = $1,500
Depreciation expense per month = $1,500/12 = $125

For computer: 
Depreciation expense per year = $12,000/4 = $3,000
Depreciation expense per month = $3,000/12 = $250

Total monthly depreciation expense = $70 + $125 + $250 = $445.

Therefore, the correct answer is D.

Question 9

Viva Inc.had bought machine X for $15,500 two years ago.The machine had no residual value and had an estimated useful life of 10 years.If the company uses the straight-line depreciation method,calculate the current book value of the machine.

Accepted Answer

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Question 10

An adjusted trial balance does not list the revenues and expenses of a business.

Accepted Answer

An adjusted trial balance does list the revenues and expenses of a business, along with their corresponding account balances. This is necessary in order to prepare the financial statements.

Question 11

The accountant for Jones Auto Repair Inc.failed to make an adjusting entry to record $5,000 of unpaid salaries for the last 2 weeks of the year.Which of the following is an impact of this omission?

Accepted Answer

The omission of recording unpaid salaries means expenses are understated, leading to an overstatement of net income.

Question 12

If a company fails to make an adjusting entry for accrued revenues,the net income will be overstated.

Accepted Answer

If a company fails to make an adjusting entry for accrued revenues, the net income will be understated.

Question 13

On July 1,Alpha Inc.paid rent of $15,000 for a small equipment storage area for the period of July 1 till December 31.Provide the adjusting journal entry on July 31.(Ignore explanation)Assume the prepaid expense is initially recorded as an asset.

Accepted Answer

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Question 14

Real Weight Losers,a diet 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 method 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 Real Weight Losers,a diet magazine,collected $480,000 in...

Question 15

On April 1,Balsa Inc.purchased office supplies for $1,500.At the end of April,they took a count of the remaining supplies and found that there was $500 of supplies left.Please provide the adjusting entry needed at the end of April.(Ignore explanation)Assume the office supplies were initially recorded as an asset.Assume there were no office supplies on hand prior to the purchase on April 1.

Accepted Answer

The answer of On April 1,Balsa Inc.purchased office supplies for...

Question 16

On July 1,Alpha Inc.prepaid rent for a small equipment storage area.They paid $20,000 to rent the area for the period of July 1 through the end of the year.Provide the journal entry needed on July 1 when the payment is made.(Ignore explanation)Assume the prepaid expense is initially recorded as an asset.

Accepted Answer

The answer of On July 1,Alpha Inc.prepaid rent for a...

Question 17

Henry Tax Planning Service bought production equipment for $9,600 on January 1,2015.It has an estimated useful life of 5 years and zero residual value.Henry uses the straight-line method to calculate depreciation and records depreciation expense in the books at the end of every month.As of June 30,2015,the book value of this equipment shown on its balance sheet will be ________.

Accepted Answer

The annual depreciation expense is $9,600 / 5 = $1,920. Monthly depreciation is $1,920 / 12 = $160. For 6 months, depreciation is $160 * 6 = $960. The book value as of June 30, 2015, is $9,600 - $960 = $8,640.

Question 18

Luminous Electrical Inc.performed services costing $8,000 on January 24 and invoiced the customer.It received the $8,000 on January 31.Provide the journal entry on January 24 when services were rendered.(Ignore explanation.)

Accepted Answer

The answer of Luminous Electrical Inc.performed services costing $8,000 on...

Question 19

The adjusted trial balance shows ________.

Accepted Answer

The adjusted trial balance shows the account balances after adjustments have been made, such as for accruals and deferrals. This is different from the unadjusted trial balance, which shows account balances before adjustments. The adjusted trial balance includes all types of accounts, including revenue and expense accounts as well as balance sheet accounts.

Question 20

If a company fails to make an adjusting entry for prepaid expense,the assets will be overstated.Assume the prepaid expense is initially recorded as an asset.

Accepted Answer

If a prepaid expense is not properly adjusted, the amount recorded as an asset will remain on the balance sheet even though the expense has already been incurred. This will result in an overstatement of the company's assets.

Quiz 3: The Adjusting Process