Question 1

On July 1,Alpha,Inc.prepaid rent for a small equipment storage area.Alpha paid $20,000 to rent the area from 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 deferred expense is initially recorded as an asset.

Accepted Answer

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

Question 2

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.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 $1,500.At...

Question 3

Viva,Inc.bought machine X for $18,000 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

Book value of machine X
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Question 4

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

Accepted Answer

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

Question 5

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 31,2017.
 $\begin{array}{lll}
\text { Cash } & \$ 6,000 \text { Dividends } & \$ 3,000 \
\text { Accounts Receivable } & 2,000 \text { Service Revenue } & ? \
\text { Office Supplies } & 1,800 \text { Salaries Expense } & 4,000 \
\text { Equipment } & 15,000 \text { Rent Expense } & 800
\end{array}$ $\begin{array}{lcc}
\text { Accumulated Depreciation - } & 9,000& \text { Depreciation Expense - }& 1,500 \
\text { Equipment } && \text { Equipment } & \
\text { Common Stock } & 15,000& \text { Supplies Expense }&500
\end{array}$

Accepted Answer

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

Question 6

Hank's Tax Planning Service started business in January 2016.The company rented an office for $7,000 per month starting from January 1,2016.On that day,Hank prepaid the rent through June 30.The company makes adjusting entries at the end of each month.What is the balance in the Prepaid Rent account as of April 30,2016?

Accepted Answer

11ea86d6_8261_766a_92b6_7f9f0b97e129_TB2804_00

Question 7

The accountant of Omega Consulting,Inc.failed to make an adjusting entry to record $6,000 for unearned service revenues that were earned before the end of the fiscal year.Assume the company initially recorded a liability.Which of the following statements is true?

Accepted Answer

The failure to adjust the unearned service revenue means that the liability remains on the books, even though the revenue has been earned. This results in an overstatement of total liabilities.

Question 8

Ariel Tax Planning Service has the following plant assets: Communications equipment: Cost,$8,640 with useful life of 8 years; Furniture: Cost,$18,000 with useful life of 12 years; and Computer: Cost,$13,440 with useful life of 4 years.Assume the residual value of all the assets is zero and the straight-line method is used. Ariel's monthly depreciation journal entry will include a ________.

Accepted Answer

Straight-line depreciation = (Cost - Residual value)/ Useful life
Straight-line depreciation for:
 11ea86d6_8263_2425_92b6_711176ce01b8_TB2804_00 11ea86d6_8263_4b36_92b6_535fec4e4639_TB2804_00 11ea86d6_8263_4b37_92b6_6fd4409cfe9f_TB2804_00 11ea86d6_8263_7248_92b6_bfe9d117963c_TB2804_00

Question 9

Russin Tax Planning Service bought computer equipment for $22,000 on January 1,2016.It has an estimated useful life of four years and zero residual value.Russin uses the straight-line method to calculate depreciation and records depreciation expense in the books at the end of every month.Calculate the amount of Depreciation Expense for the period,January 1,2016 through September 30,2016,for this equipment.(Round any intermediate calculations to two decimal places,and your final answer to the nearest dollar. )

Accepted Answer

Straight-line depreciation = (Cost - Residual value)/ Useful life
Straight-line depreciation = ($22,000 - 0)/ 4 years = $5,500 per year
 11ea86d6_8261_9d7b_92b6_c98cd7790cc2_TB2804_00 Depreciation Expense from January to
 11ea86d6_8261_c48c_92b6_51d1dfa9c12b_TB2804_00

Question 10

Downs Tax Planning Service bought communications equipment for $9,600 on January 1,2017.It has an estimated useful life of five years and zero residual value.Downs uses the straight-line method to calculate depreciation and records depreciation expense in the books at the end of every month.As of June 30,2017,the balance in the Accumulated Depreciation account for this equipment is ________.

Accepted Answer

Straight-line depreciation = (Cost - Residual value)/ Useful life
Straight-line depreciation = ($9,600 - 0)/ 5 years = $1,920 per year
 11ea86d6_8262_12ad_92b6_31544099b61e_TB2804_00 11ea86d6_8262_12ae_92b6_7d35efae0768_TB2804_00

Question 11

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

Accepted Answer

If the deferred expense is initially recorded as an asset and no adjusting entry is made, then the asset will remain on the balance sheet, thus overstating the assets.

Question 12

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

Accepted Answer

An adjusted trial balance lists the revenues and expenses of a business, along with all other accounts and their adjusted balances.

Question 13

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 14

The adjusted trial balance shows ________.

Accepted Answer

The adjusted trial balance shows the account balances after adjustments have been made, which is why choice A is the correct answer. It includes all accounts – both revenue and expense accounts, as well as balance sheet accounts.

Question 15

Bryan Consultants had the following balances before preparing adjusting entries in the books on December 31,2017.
 $$\begin{array} { l l l } 
\text { Cash } & \$ 6,000 & \text { Dividends }7\$ \
\text { Accounts Receivable } & 2,000 \text { Service Revenue } & 10,600 \
\text { Office Supplies } & 1,800 \text { Salaries Expense } & 4,000 \
\text { Equipment } & 15,000 & \text { Rent Expense }&8
\end{array}$$ $$\begin{array} { l l l } 
\text { Accumulated Depreciation - } & 9,000 \text { Depreciation Expense- } & \text { 1,500 } \
\text { Equipment } & { \text { Equipment } } & \
\text { Common Stock } & 15,000 & \text {Supplies } \
\text { Expense } & 500 &
\end{array}$$ 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 earned but not recorded,$200.

Accepted Answer

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

Question 16

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

Accepted Answer

The answer of On July 1,Omega,Inc.paid rent of $15,000 for...

Question 17

All of the accounts and the account balances of a company appear on the ________.

Accepted Answer

The answer of All of the accounts and the account...

Question 18

Financial statements are prepared from the balances in a(n)________.

Accepted Answer

The adjusted trial balance contains all the necessary account balances needed to prepare the financial statements, including any adjustments made for accruals, deferrals, and other adjusting entries. The general journal and chart of accounts are used to record transactions and organize accounts, but they do not contain the final balances necessary for financial statement preparation. The unadjusted trial balance is an interim step in the accounting cycle and does not reflect any necessary adjustments.

Question 19

DeLito Tax Planning Service bought production equipment for $10,200 on January 1,2017.It has an estimated useful life of five years and zero residual value.DeLito uses the straight-line method to calculate depreciation and records depreciation expense in the books at the end of every month.As of June 30,2017,the book value of this equipment shown on its balance sheet will be ________.

Accepted Answer

Straight-line depreciation = (Cost - Residual value)/ Useful life
Straight-line depreciation = ($10,200 - 0)/ 5 years = $2,040 per year
 11ea86d6_8262_60cf_92b6_dd67a8a01033_TB2804_00 11ea86d6_8262_60d0_92b6_433821ab8d3f_TB2804_00 Book value of equipment = $10,200 - $1,020 = $9,180

Question 20

Ursula Tax Planning Service has the following plant assets: Communications equipment: Cost,$7,120 with useful life of eight years; Furniture: Cost,$22,800 with useful life of 12 years; and Computer: Cost,$12,000 with useful life of four years.(Assume residual value of all the assets is zero. )Ursula's monthly depreciation expense calculated using the straight-line method is ________.(Round any intermediate calculations to two decimal places,and your final answer to the nearest dollar. )

Accepted Answer

Straight-line depreciation = (Cost - Residual value)/ Useful life
Straight-line depreciation for:
Communications
 11ea86d6_8262_aef1_92b6_9b44770dd683_TB2804_00 11ea86d6_8262_d602_92b6_1fe83703af10_TB2804_00 11ea86d6_8262_d603_92b6_994efd2b535b_TB2804_00 11ea86d6_8262_fd14_92b6_e5b96073a44f_TB2804_00

Quiz 3: The Adjusting Process