Question 1

The asset account,Office Supplies had a beginning balance of $5,700.During the accounting period,office supplies were purchased,on account,for $5,100.A physical count,on the last day of the accounting period,shows $2,000 of office supplies on hand.What is the amount of Supplies Expense for the accounting period?

Accepted Answer

C) Office Supplies:
 11ea8873_d44e_77aa_bb89_a51e77a7230c_TB5026_00

Question 2

Dynamic Services Company purchased computers that are to be used in its consulting services.Based on the matching principle,the related account that should appear on the income statement for the year ended December 31,2018 is ________.

Accepted Answer

Depreciation is an expense that reflects the cost of using the computer equipment over its useful life. As the equipment is used to generate revenue in Dynamic Services Company's consulting services, its cost should be recognized as Depreciation Expense - Equipment on the income statement. Service Revenue would be an income account, Accumulated Depreciation - Equipment is a contra-asset account that appears on the balance sheet, and Equipment Expense is not an appropriate account as it does not reflect the cost of using the equipment over time.

Question 3

The depreciation method that allocates an equal amount of depreciation to each year is called the straight-line method.

Accepted Answer

The statement is correct. The straight-line method of depreciation involves distributing the same amount of depreciation expense evenly over the useful life of an asset.

Question 4

Prepaid Rent is an expense account that appears on the income statement.

Accepted Answer

Prepaid Rent is an asset.

Question 5

Contra asset accounts,such as Accumulated Depreciation,always have normal debit balances.

Accepted Answer

A contra account's normal balance (debit or credit)is the opposite of the normal balance of the related account.

Question 6

An accrual adjusting entry records an expense after the cash is paid,or it records revenue before the cash is received.

Accepted Answer

An accrual records an expense before the cash is paid, or it records revenue before the cash is received.

Question 7

The sum of all the depreciation expenses recorded to date for a depreciable asset is called residual value.

Accepted Answer

The sum of all the depreciation expenses recorded to date for a depreciable asset is called accumulated depreciation.

Question 8

A contra account's normal balance is the opposite of the normal balance of the related account.

Accepted Answer

A contra account is an account that is related to another account but has an opposite normal balance. For example, accumulated depreciation is a contra account to the asset account, and its normal balance is a credit balance. Therefore, the statement is true.

Question 9

In the case of a deferred expense,the adjusting entry required at the end of a period will consist of a debit to the Prepaid Expense account.Assume the deferred expense was initially recorded as an asset.

Accepted Answer

The adjusting entry for a deferred expense typically involves a debit to an expense account (reflecting the expense now incurred) and a credit to the Prepaid Expense account (reducing the asset as it is used up).

Question 10

The following Office Supplies account information is available for Nabors Company. $$\begin{array} { | l | r | } 
\hline \text { Beginning balance } & \$ 2,000 \
\hline \text { Office Supplies expensed } & 8,000 \
\hline \text { Ending balance } & 1,000 \
\hline
\end{array}$$ From the above information,calculate the amount of office supplies purchased.

Accepted Answer

The amount of office supplies purchased can be calculated by adding the office supplies expensed to the ending balance and then subtracting the beginning balance: $8,000 + $1,000 - $2,000 = $7,000.

Question 11

Prepaid Insurance is an asset account that appears on the balance sheet.

Accepted Answer

Prepaid insurance represents the amount of insurance premiums paid in advance by a company, which will be used to cover future insurance expenses. It is classified as an asset account, as it represents a future economic benefit that the company has paid for and will receive in the future.

Question 12

On January 1,2018,the Prepaid Insurance account of Dogwood Company had a beginning balance of $1,500.Three months of insurance premiums remain in this beginning balance.On February 21,2018,the company paid an annual insurance premium in the amount of $3,400 for the period beginning March 1.On February 28,2018,the balance in Prepaid Insurance is $1,000.

Accepted Answer

Insurance premium per month = $1,500 / 3 = $500
Balance in Prepaid Insurance as of 11ea8873_d44e_0277_bb89_b71938aa6380_TB5026_00

Question 13

On January 1,Nash Company had $1,000 of supplies on hand.During January,Nash purchased $5,500 worth of new supplies.At the end of the month,a count revealed $700 worth of supplies remaining on the shelves.The adjusting entry needed will include a debit to Supplies Expense of $5,800.The supplies were initially recorded as an asset.

Accepted Answer

Supplies Expense = $1,000 + $5,500 - $700 = $5,800

Question 14

Adjusting entries are needed to correctly measure the ________.

Accepted Answer

Adjusting entries are made to ensure that the net income (loss) on the income statement is accurately reflected. The other choices (ending/beginning balance in the Cash account) relate specifically to cash and would not necessarily require an adjusting entry for accuracy.

Question 15

Which of the following is NOT a type of adjusting entry?

Accepted Answer

The other three options (deferred expenses, accrued revenues, deferred revenues) are all types of adjusting entries. Unearned expenses are not a common type of adjusting entry.

Question 16

Stallings Company purchased manufacturing equipment for $8,400.It has an estimated useful life of seven years and no residual value.The company should record depreciation expense of $50 per month.(Assume that the company uses the straight-line method.)

Accepted Answer

Depreciation Expense per month = ($8,400 / 7) / 12 = $100

Question 17

In the case of a deferred expense,the adjusting entry required at the end of a period will consist of a credit to the Prepaid Expense account.Assume the deferred expense was initially recorded as an asset.

Accepted Answer

In the case of a deferred expense, the adjusting entry required at the end of a period will consist of a credit to the Prepaid Expense account to reduce the asset balance and recognize the expense.

Question 18

A contra account's normal balance (debit or credit)is the opposite of the normal balance of the related account.

Accepted Answer

This is true. Contra accounts are accounts that are paired with another account and have an opposite normal balance. For example, accumulated depreciation is a contra account paired with the asset account it relates to, and has a normal credit balance while the asset account has a normal debit balance.

Question 19

An adjusting entry is completed ________.

Accepted Answer

Adjusting entries are completed at the end of the accounting period to ensure that all income and expenses have been recorded accurately, and to update various accounts to their correct balances before preparing financial statements. Therefore, option B is the correct answer.

Question 20

Princeton Financial Services Company purchased computers that are to be used in its consulting services.Based on the matching principle,what account,other than Computers,should appear on the balance sheet as of December 31,2018?

Accepted Answer

Since Princeton Financial Services Company purchased computers to be used in its consulting services, it must account for the depreciation of those assets. As per the matching principle, depreciation expense should be recognized in the same period as the revenue earned by using those assets. Therefore, Accumulated Depreciation - Equipment is the account that should appear on the balance sheet as of December 31, 2018. Option A (Depreciation Expense - Equipment) is an income statement account, not a balance sheet account. Option B (Service Revenue) is a revenue account and does not relate to the purchase and use of assets. Option D (Equipment Expense) is not a standard accounting term and does not accurately reflect the nature of the account needed for depreciation expenses.

Quiz 3: The Adjusting Process

Dynamic Services Company purchased computers that are to be used in its consulting services.Based on the matching principle,the related account that should appear on the income statement for the year ended December 31,2018 is ________.

The depreciation method that allocates an equal amount of depreciation to each year is called the straight-line method.

Prepaid Rent is an expense account that appears on the income statement.

Contra asset accounts,such as Accumulated Depreciation,always have normal debit balances.

An accrual adjusting entry records an expense after the cash is paid,or it records revenue before the cash is received.

The sum of all the depreciation expenses recorded to date for a depreciable asset is called residual value.

A contra account's normal balance is the opposite of the normal balance of the related account.

In the case of a deferred expense,the adjusting entry required at the end of a period will consist of a debit to the Prepaid Expense account.Assume the deferred expense was initially recorded as an asset.

Prepaid Insurance is an asset account that appears on the balance sheet.

Adjusting entries are needed to correctly measure the ________.

Which of the following is NOT a type of adjusting entry?

Stallings Company purchased manufacturing equipment for $8,400.It has an estimated useful life of seven years and no residual value.The company should record depreciation expense of $50 per month.(Assume that the company uses the straight-line method.)

In the case of a deferred expense,the adjusting entry required at the end of a period will consist of a credit to the Prepaid Expense account.Assume the deferred expense was initially recorded as an asset.

A contra account's normal balance (debit or credit)is the opposite of the normal balance of the related account.

An adjusting entry is completed ________.

Princeton Financial Services Company purchased computers that are to be used in its consulting services.Based on the matching principle,what account,other than Computers,should appear on the balance sheet as of December 31,2018?