Question 1

Antler Company holds a $10,000 note receivable as an investment. Each month Antler earns $100 of interest revenue on the note. At the end of the accounting period, Antler needs to record the accrued revenue on the note for three months that it will receive next year. The amount of the adjusting journal entry would be:

Accepted Answer

The accrued revenue for three months that Antler will receive next year will be $300 ($100 per month x 3 months). Therefore, the adjusting journal entry should be a credit to Interest Revenue for $300 and a debit to Accrued Interest Receivable for $300. Option C is the correct choice.

Question 2

The Book Company had the following adjustments at December 31, the end of the accounting period:
A. The Book Company uses straight-line depreciation for its equipment. The amount of depreciation to be recorded for the equipment is $10,500.
B. Accrued interest of $2,000 on a note receivable will be received in January.
C. On November 1, The Book Company paid for five months of rent in advance and debited Prepaid Rent. Rent is $1,000 per month.
D. On August 1, the company collected $24,000 in advance for a consulting contract, which is to be earned evenly over the next 12 months. The original entry debited cash and credited unearned revenue.
E. Employees are owed salaries for 3 days of a 5 day workweek; weekly payroll is $30,000.
F. The unadjusted balance of the supplies account is $2,750. Based on a physical count, the cost of supplies on hand is $1,250.
G. The company has incurred interest expense of $850 that will be paid in January.
1. Journalize the adjusting entries.
2. Assuming the adjustments were not made, calculate the net overstatement or understatement this would have on net income. Would the company appear to be more or less profitable if the adjustments were not made?

Accepted Answer

The answer of The Book Company had the following adjustments...

Question 3

On December 1, 2012, Mindy's Daycare receives $2,700 in advance for an agreement to care for Susan's children for the months of December, January, and February. Mindy's Daycare will make an adjusting entry on December 31, 2012 to:

Accepted Answer

When Mindy's Daycare receives advance payment, it is recorded as Unearned Revenue because the service has not yet been provided. However, by the end of December, Mindy's Daycare has provided one month of service out of the three months covered by the advance payment. Therefore, $900 of the Unearned Revenue needs to be recognized as Revenue in December through an adjusting entry. The other $1,800 ($900 × 2) will be recognized as Revenue in January and February, respectively. Thus, the correct answer is to debit Unearned Revenue for $900.

Question 4

A company has $500 in Supplies before any adjustments. At the end of the year, an adjusting entry is made to debit Supplies Expense for $100. The ending balance in the Supplies account will be:

Accepted Answer

The adjusting entry debiting Supplies Expense for $100 means that $100 worth of supplies were used up during the year, leaving $400 ($500 - $100) in the Supplies account at the end of the year.

Question 5

The Prepaid Rent account has a $20,000 debit balance in the unadjusted trial balance. There is a $1,000 credit adjustment to Prepaid Rent. The adjusted trial balance will show Prepaid Rent as a:

Accepted Answer

The $20,000 debit balance in Prepaid Rent is reduced by the $1,000 credit adjustment, resulting in a $19,000 debit balance.

Question 6

Indicate if the following transactions adjust a Prepaid Expense (PE), an Accrued Expense (AE), an Unearned Revenue (UR), or an Accrued Revenue (AR):
_____ 1. Paid the yearly insurance policy.
_____ 2. Received payment for a yearly magazine subscription.
_____ 3. Services provided by an accountant that have not yet been billed or recorded.
_____ 4. Received the telephone bill which will be paid next month.
_____ 5. Received payment for computer consulting services which will be performed next year

Accepted Answer

The answer of Indicate if the following transactions adjust a...

Question 7

Net income for the period appears on the income statement and the balance sheet for the period.

Accepted Answer

Net income appears on the income statement, but on the balance sheet, it is reflected in the equity section as part of retained earnings, not directly as net income.

Question 8

ABC Company owes the bank $40,000 on their mortgage. The bank charges them $300 a month in interest. At the end of the accounting period, ABC owes the bank three months of interest. The adjusting journal entry made by ABC Company will include:

Accepted Answer

ABC Company needs to recognize the interest expense incurred over the three months. The interest is $300 per month, so for three months, it is $900. Therefore, the adjusting entry will include a debit to Interest Expense for $900.

Question 9

Complete the following chart summarizing adjusting entries. The first category of adjusting entries has been completed for you.

Accepted Answer

The answer of Complete the following chart summarizing adjusting entries....

Question 10

The beginning balance of retained earnings appears on the Balance Sheet and the statement of retained earnings.

Accepted Answer

The answer of The beginning balance of retained earnings appears...

Question 11

At December 31, the ABC Company owes an employee for four days of work that will not be paid until January 5th. The weekly rate of pay for a five-day workweek is $1,000.The adjusting entry to record the accrued wages will include a:

Accepted Answer

The answer of At December 31, the ABC Company owes...

Question 12

Journalize the adjusting entries needed on December 31, the end of the current accounting period for Petra Industries using the following data:
A. The balance in Office Supplies before adjustment is $4,200. A physical count reveals $2,750 of supplies on hand at December 31.
B. A computer was purchased on January 1 for $12,000. The computer has a useful life of 3 years and is depreciated using the straight-line method.
C. A one-year insurance policy costing $5,400 was purchased on November 1.
D. Employee salaries are owed for 4 days of a regular 5 day work week. Weekly payroll is $13,600.
E. Unearned Maintenance Revenue has a balance of $21,000 before adjustment. Records show that $14,050 of that amount has been earned by December 31.

Accepted Answer

The answer of Journalize the adjusting entries needed on December...

Question 13

For the year ended, December 31, 2012, the Acme Chemical Company omitted the following adjusting journal entries in error. For each entry, indicate if net income will be overstated or understated by placing an "X" in the appropriate box.

Accepted Answer

The answer of For the year ended, December 31, 2012,...

Question 14

Prepare the following adjusting journal entries for Mayville Magazine Company:
A) The Company has a Note Payable for $8,000 with an annual interest rate of 10%. The interest for the year needs to be recorded.
B) The beginning balance in the Printing Supplies account was $600. During the year additional supplies of $400 were purchased. A physical inventory count at the end of the year indicated that $160 of supplies are left.
C) The Company received $4,500 on May 1 for a twelve month magazine subscription.

Accepted Answer

The answer of Prepare the following adjusting journal entries for...

Question 15

Anya's Boutique has a note receivable. During the current year, Anya's Boutique has earned accrued interest revenue of $850 that it will collect next year. Prepare the journal entry to (A) record the accrued revenue and (B) to record the payment that Anya's Boutique will receive next year.

Accepted Answer

The answer of Anya's Boutique has a note receivable. During...

Question 16

The Unearned Rent account has a $6,000 credit balance in the unadjusted trial balance. There is a $1,000 debit adjustment to Unearned Rent. The adjusted trial balance will show Unearned Rent as a:

Accepted Answer

The $6,000 credit balance is reduced by the $1,000 debit adjustment, resulting in a $5,000 credit balance.

Question 17

HG Enterprises paid $105,000 for office furniture. The furniture is depreciated using the straight-line method and has an estimated service life of 7 years. After three years of use, the book value of the furniture will be:

Accepted Answer

The annual depreciation expense can be calculated as $105,000 / 7 = $15,000 per year. After three years of use, the accumulated depreciation will be $15,000 * 3 = $45,000. Therefore, the book value will be $105,000 - $45,000 = $60,000.

Question 18

The balance sheet is the last financial statement to be prepared.

Accepted Answer

The balance sheet is typically the last financial statement to be prepared as it summarizes the company's financial position as of a specific date. The income statement and cash flow statement are usually prepared beforehand to provide information on the company's performance during a specific period of time.

Question 19

The balance in the Accumulated Depreciation - Machine account at the end of the year is $10,000. The book value of the machine is $30,000. The cost of the machine was:

Accepted Answer

The book value of an asset is equal to its cost minus its accumulated depreciation. Therefore, the cost of the machine is equal to its book value plus its accumulated depreciation, which is $30,000 + $10,000 = $40,000.

Question 20

Factory Supplies had a balance of $14,873 on January 1, 2012. During 2012, supplies were purchased on July 15 for $7,510 and on October 9, for $3,679. Requisition sheets completed during the year indicated that $9,458 of supplies had been used by the workers during the year. Determine the ending balance in the Factory Supplies account.

Accepted Answer

The answer of Factory Supplies had a balance of $14,873...

Quiz 3: Accrual Accounting Income