Question 1

All of the following statements regarding vertical analysis are true except

Accepted Answer

A)  vertical analysis may be prepared for several periods to analyze changes in relationships over time 
B)  in a vertical analysis of a balance sheet, each asset item is stated as a percent of total assets 
C)  in a vertical analysis of an income statement, each item is stated as a percent of total expenses 
D)  major differences between a company's vertical analysis and industry averages should be investigated 
A)  vertical analysis may be prepared for several periods to analyze changes in relationships over time 
B)  in a vertical analysis of a balance sheet, each asset item is stated as a percent of total assets 
C)  in a vertical analysis of an income statement, each item is stated as a percent of total expenses 
D)  major differences between a company's vertical analysis and industry averages should be investigated

Question 2

At year-end, the balance in the prepaid insurance account, prior to any adjustments, is $6,000. The amount of the journal entry required to record insurance expense will be $4,000 if the amount of unexpired insurance applicable to future periods is $2,000.

Accepted Answer

A) True 
 B)False

Question 3

The matching concept supports matching expenses with the related revenues.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is an example of a prepaid expense?

Accepted Answer

A)  Supplies 
B)  Accounts Receivable 
C)  Unearned Subscriptions 
D)  Unearned Fees 
A)  Supplies 
B)  Accounts Receivable 
C)  Unearned Subscriptions 
D)  Unearned Fees

Question 5

For each of the following, journalize the necessary adjusting entry:
a) A business pays weekly salaries of $22,000 on Friday for a five-day week ending on that day. Journalize the necessary adjusting entry at the end of the fiscal period, assuming that the fiscal period ends 1) on Tuesday, 2) on Wednesday.
b) The balance in the prepaid insurance account before adjustment at the end of the year is $18,000. Journalize the adjusting entry required under each of the following alternatives: 1) the amount of insurance expired during the year is $5,300, 2) the amount of unexpired insurance applicable to a future period is $2,700.
c) On July 1 of the current year, a business pays $54,000 to the city for license taxes for the coming fiscal year. The same business is also required to pay an annual property tax at the end of the year. The estimated amount of the current year's property tax allocated to July is $4,800. 1) Journalize the two adjusting entries required to bring the accounts affected by the taxes up to date as of July 31. 2) What is the amount of tax expense for July?
d) The estimated depreciation on equipment for the year is $32,000.

Accepted Answer

The answer of For each of the following, journalize the...

Question 6

A company realizes that the last two days' revenue for the month was billed but not recorded. The adjusting entry on December 31 is a debit to Accounts Receivable and a credit to Fees Earned.

Accepted Answer

A) True 
 B)False

Question 7

A company receives $360 for a 12-month trade magazine subscription on August 1. The adjusting entry on December 31 is a debit to Unearned Subscription Revenue, $150, and credit to Subscription Revenue, $150.

Accepted Answer

A) True 
 B)False

Question 8

What is the purpose of the adjusted trial balance?

Accepted Answer

A)  to verify that all of the adjusting entries have been posted 
B)  to verify that the net income loss) is correctly reported 
C)  to verify that no adjusting journal entry has been omitted 
D)  to verify that the debits and credits balance 
A)  to verify that all of the adjusting entries have been posted 
B)  to verify that the net income loss) is correctly reported 
C)  to verify that no adjusting journal entry has been omitted 
D)  to verify that the debits and credits balance

Question 9

A company pays $36,000 for twelve months' rent on October 1, recording the prepayment as an asset. The adjusting entry on December 31 is a debit to Rent Expense, $9,000, and a credit to Prepaid Rent, $9,000.

Accepted Answer

A) True 
 B)False

Question 10

On January 2, Dog Mart prepaid $30,000 rent for the year and recorded the prepayment in an asset account. Prepare the January 31 adjusting entry for rent expense.

Accepted Answer

Jan. 31 Rent Expense

Question 11

Supplies are recorded as assets when purchased. Therefore, the credit to Supplies in the adjusting entry is for the amount of supplies

Accepted Answer

A)  still on hand 
B)  purchased 
C)  used 
D)  required for the next accounting period 
A)  still on hand 
B)  purchased 
C)  used 
D)  required for the next accounting period

Question 12

Which of the following is the proper adjusting entry, based on a prepaid insurance account balance before adjustment of $14,000 and unexpired insurance of $3,000, for the fiscal year ending on April 30?

Accepted Answer

A)  debit Insurance Expense, $3,000; credit Prepaid Insurance, $3,000 
B)  debit Insurance Expense, $14,000; credit Prepaid Insurance, $14,000 
C)  debit Prepaid Insurance, $11,000; credit Insurance Expense, $11,000 
D)  debit Insurance Expense, $11,000; credit Prepaid Insurance, $11,000 
A)  debit Insurance Expense, $3,000; credit Prepaid Insurance, $3,000 
B)  debit Insurance Expense, $14,000; credit Prepaid Insurance, $14,000 
C)  debit Prepaid Insurance, $11,000; credit Insurance Expense, $11,000 
D)  debit Insurance Expense, $11,000; credit Prepaid Insurance, $11,000

Question 13

An adjusting entry to accrue an incurred expense will affect total liabilities.

Accepted Answer

A) True 
 B)False

Question 14

Accrued salaries of $600 owed to employees for December 29, 30, and 31 are not taken into consideration in preparing the financial statements for the year ended December 31. Indicate which items will be erroneously stated, because of the error, on a) the income statement for the year and b) the balance sheet as of December
31. Also indicate whether the items in error will be overstated or understated.

Accepted Answer

a) Salary expense or expenses)

Question 15

Data for an adjusting entry described as "accrued wages, $2,020" requires a

Accepted Answer

A)  debit to Wages Expense and a credit to Wages Payable 
B)  debit to Wages Payable and a credit to Wages Expense 
C)  debit to Accounts Receivable and a credit to Wages Expense 
D)  debit to Dividends and a credit to Wages Payable 
A)  debit to Wages Expense and a credit to Wages Payable 
B)  debit to Wages Payable and a credit to Wages Expense 
C)  debit to Accounts Receivable and a credit to Wages Expense 
D)  debit to Dividends and a credit to Wages Payable

Question 16

Identify the effect a-h) that omitting each of the following items would have on the balance sheet.
-An attorney has earned 1/2 of a retainer fee that was received and recorded last month. No adjustment was recorded for the amount earned.

Accepted Answer

A) Assets and stockholders' equity overstated 
B) Assets and stockholders' equity understated 
C) Assets overstated and stockholders' equity understated 
D) Assets understated and stockholders' equity overstated 
E) Liabilities and stockholders' equity overstated
F)Liabilities and stockholders' equity understated
G)Liabilities overstated and stockholders' equity understated
H)Liabilities understated and stockholders' equity overstated 
A) Assets and stockholders' equity overstated 
B) Assets and stockholders' equity understated 
C) Assets overstated and stockholders' equity understated 
D) Assets understated and stockholders' equity overstated 
E) Liabilities and stockholders' equity overstated
F)Liabilities and stockholders' equity understated
G)Liabilities overstated and stockholders' equity understated
H)Liabilities understated and stockholders' equity overstated

Question 17

The estimated amount of depreciation on equipment for the current year is $5,300. Journalize the adjusting entry to record the depreciation.

Accepted Answer

Depreciation Expense

Question 18

If there is a balance in the unearned subscriptions account after adjusting entries are made, it represents an)

Accepted Answer

A)  deferral 
B)  accrual 
C)  dividend 
D)  revenue 
A)  deferral 
B)  accrual 
C)  dividend 
D)  revenue

Question 19

As time passes, fixed assets other than land lose their capacity to provide useful services. To account for this decrease in usefulness, the cost of fixed assets is systematically allocated to expense through a process called

Accepted Answer

A)  equipment allocation 
B)  depreciation 
C)  accumulation 
D)  matching 
A)  equipment allocation 
B)  depreciation 
C)  accumulation 
D)  matching

Question 20

Prior to the adjusting process, accrued revenue has

Accepted Answer

A)  been earned and cash received 
B)  been earned and not recorded as revenue 
C)  not been earned but recorded as revenue 
D)  not been recorded as revenue but cash has been received 
A)  been earned and cash received 
B)  been earned and not recorded as revenue 
C)  not been earned but recorded as revenue 
D)  not been recorded as revenue but cash has been received

Exam 3: The Adjusting Process

All of the following statements regarding vertical analysis are true except

At year-end, the balance in the prepaid insurance account, prior to any adjustments, is $6,000. The amount of the journal entry required to record insurance expense will be $4,000 if the amount of unexpired insurance applicable to future periods is $2,000.

The matching concept supports matching expenses with the related revenues.

Which of the following is an example of a prepaid expense?

A company realizes that the last two days' revenue for the month was billed but not recorded. The adjusting entry on December 31 is a debit to Accounts Receivable and a credit to Fees Earned.

A company receives $360 for a 12-month trade magazine subscription on August 1. The adjusting entry on December 31 is a debit to Unearned Subscription Revenue, $150, and credit to Subscription Revenue, $150.

What is the purpose of the adjusted trial balance?

A company pays $36,000 for twelve months' rent on October 1, recording the prepayment as an asset. The adjusting entry on December 31 is a debit to Rent Expense, $9,000, and a credit to Prepaid Rent, $9,000.

On January 2, Dog Mart prepaid $30,000 rent for the year and recorded the prepayment in an asset account. Prepare the January 31 adjusting entry for rent expense.

Supplies are recorded as assets when purchased. Therefore, the credit to Supplies in the adjusting entry is for the amount of supplies

Which of the following is the proper adjusting entry, based on a prepaid insurance account balance before adjustment of $14,000 and unexpired insurance of $3,000, for the fiscal year ending on April 30?

An adjusting entry to accrue an incurred expense will affect total liabilities.

Data for an adjusting entry described as "accrued wages, $2,020" requires a

Identify the effect a-h) that omitting each of the following items would have on the balance sheet. -An attorney has earned 1/2 of a retainer fee that was received and recorded last month. No adjustment was recorded for the amount earned.

The estimated amount of depreciation on equipment for the current year is $5,300. Journalize the adjusting entry to record the depreciation.

If there is a balance in the unearned subscriptions account after adjusting entries are made, it represents an)

As time passes, fixed assets other than land lose their capacity to provide useful services. To account for this decrease in usefulness, the cost of fixed assets is systematically allocated to expense through a process called

Prior to the adjusting process, accrued revenue has

Introduction to Accounting and Business

Analyzing Transactions

Completing the Accounting Cycle

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting Concepts and Principles

Job Order Costing

Process Cost Systems

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing for Management Analysis

Budgeting

Performance Evaluation Using Variances From Standard Costs

Performance Evaluation for Decentralized Operations

Differential Analysis, Product Pricing, and Activity-Based Costing

Capital Investment Analysis

Cost Allocation and Activity-Based Costing

Lean Principles, Lean Accounting, and Activity Analysis

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