Question 1

Assets are often classified into current assets, long-term investments, plant assets, and intangible assets.

Accepted Answer

A) True 
 B)False

Question 2

Permanent accounts carry their balances into the next accounting period.

Accepted Answer

A) True 
 B)False

Question 3

Flo's Flowers' current ratio is 1.3. The industry average for the current ratio is 1.2. This indicates that Flo's can cover its short term liabilities with its short term assets.

Accepted Answer

A) True 
 B)False

Question 4

If a prepaid expense account was not adjusted for the amount used, on the balance sheet assets would be ___________________ and equity would be ___________________.

Accepted Answer

overstated

Question 5

On January 1 a company purchased a five-year insurance policy for $1,800 with coverage starting immediately. If the purchase was recorded in the Prepaid Insurance account, and the company records adjustments only at year-end, the adjusting entry at the end of the first year is:

Accepted Answer

A) Debit Prepaid Insurance, $1,800; credit Cash, $1,800. 
B) Debit Prepaid Insurance, $1,440; credit Insurance Expense, $1,440. 
C) Debit Prepaid Insurance, $360; credit Insurance Expense, $360. 
D) Debit Insurance Expense, $360; credit Prepaid Insurance, $360. 
E) Debit Insurance Expense, $360; credit Prepaid Insurance, $1,440. 
A) Debit Prepaid Insurance, $1,800; credit Cash, $1,800. 
B) Debit Prepaid Insurance, $1,440; credit Insurance Expense, $1,440. 
C) Debit Prepaid Insurance, $360; credit Insurance Expense, $360. 
D) Debit Insurance Expense, $360; credit Prepaid Insurance, $360. 
E) Debit Insurance Expense, $360; credit Prepaid Insurance, $1,440.

Question 6

When there is a net loss the Income Summary account would have a credit balance.

Accepted Answer

A) True 
 B)False

Question 7

On the work sheet, net income is entered in the Income Statement Credit column as well as the Balance Sheet Credit column.

Accepted Answer

A) True 
 B)False

Question 8

The adjusted trial balance must be prepared before the adjusting entries are made.

Accepted Answer

A) True 
 B)False

Question 9

Flagg, Inc. records adjusting entries at its December 31 year end. At December 31, employees had earned $12,000 of unpaid and unrecorded salaries. The next payday is January 3, at which time $30,000 will be paid. Prepare the January 1 journal entry to reverse the effect of the December 31 salary expense accrual.

Accepted Answer

A) Debit Salaries expense $12,000; credit Salaries payable $12,000. 
B) Debit Salaries expense $18,000; debit Salaries payable $12,000; credit Cash $30,000. 
C) Debit Salaries payable $18,000; credit Cash $18,000. 
D) Debit Salaries payable $12,000; credit Salaries expense $12,000. 
E) Debit Salaries expense $18,000; credit Salaries payable $18,000. 
A) Debit Salaries expense $12,000; credit Salaries payable $12,000. 
B) Debit Salaries expense $18,000; debit Salaries payable $12,000; credit Cash $30,000. 
C) Debit Salaries payable $18,000; credit Cash $18,000. 
D) Debit Salaries payable $12,000; credit Salaries expense $12,000. 
E) Debit Salaries expense $18,000; credit Salaries payable $18,000.

Question 10

Which of the following is classified as current assets?

Accepted Answer

A) Office equipment. 
B) Patent. 
C) Unearned revenue. 
D) Office supplies. 
E) Land. 
A) Office equipment. 
B) Patent. 
C) Unearned revenue. 
D) Office supplies. 
E) Land.

Question 11

The adjusted trial balance contains information pertaining to:

Accepted Answer

A) Asset accounts only. 
B) Balance sheet accounts only. 
C) Income statement accounts only. 
D) All general ledger accounts. 
E) Revenue accounts only. 
A) Asset accounts only. 
B) Balance sheet accounts only. 
C) Income statement accounts only. 
D) All general ledger accounts. 
E) Revenue accounts only.

Question 12

Explain how accounting adjustments affect financial statements and provide an example of an adjustment that would impact the statements if not recorded.

Accepted Answer

Adjusting entries bring assets, liabilit

Question 13

If a company reporting on a calendar year basis, paid $18,000 cash on January 1 for one year of rent in advance and adjusting entries are made at the end of each month, the balance remaining in Prepaid Rent on December 1 should be $1,500.

Accepted Answer

A) True 
 B)False

Question 14

A company pays each of its two office employees each Friday at the rate of $100 per day for a five-day week that begins on Monday. If the monthly accounting period ends on Tuesday and the employees worked on both Monday and Tuesday, the month-end adjusting entry to record the salaries earned but unpaid is:

Accepted Answer

A) Debit Unpaid Salaries $600 and credit Salaries Payable $600. 
B) Debit Salaries Expense $400 and credit Salaries Payable $400. 
C) Debit Salaries Expense $600 and credit Salaries Payable $600. 
D) Debit Salaries Payable $400 and credit Salaries Expense $400. 
E) Debit Salaries Expense $400 and credit Cash $400. 
A) Debit Unpaid Salaries $600 and credit Salaries Payable $600. 
B) Debit Salaries Expense $400 and credit Salaries Payable $400. 
C) Debit Salaries Expense $600 and credit Salaries Payable $600. 
D) Debit Salaries Payable $400 and credit Salaries Expense $400. 
E) Debit Salaries Expense $400 and credit Cash $400.

Question 15

The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is:

Accepted Answer

A) Cash basis accounting. 
B) The matching principle. 
C) The time period assumption. 
D) Accrual basis accounting. 
E) Revenue basis accounting. 
A) Cash basis accounting. 
B) The matching principle. 
C) The time period assumption. 
D) Accrual basis accounting. 
E) Revenue basis accounting.

Question 16

Explain the purpose of adjusting entries at the end of a period and provide an example of an adjusting entry.

Accepted Answer

Adjusting entries are necessary for tran

Question 17

The trial balance prepared after all closing entries have been journalized and posted is called the:

Accepted Answer

A) Unadjusted trial balance. 
B) Post-closing trial balance. 
C) General ledger. 
D) Adjusted trial balance. 
E) Work sheet. 
A) Unadjusted trial balance. 
B) Post-closing trial balance. 
C) General ledger. 
D) Adjusted trial balance. 
E) Work sheet.

Question 18

Depreciation measures the decline in market value of an asset.

Accepted Answer

A) True 
 B)False

Question 19

Assets, liabilities, and equity accounts are not closed; these accounts are called:

Accepted Answer

A) Nominal accounts. 
B) Temporary accounts. 
C) Permanent accounts. 
D) Contra accounts. 
E) Accrued accounts. 
A) Nominal accounts. 
B) Temporary accounts. 
C) Permanent accounts. 
D) Contra accounts. 
E) Accrued accounts.

Question 20

Adjusting entries are necessary so that asset, liability, revenue, and expense account balances are correctly recorded.

Accepted Answer

A) True 
 B)False

Assets are often classified into current assets, long-term investments, plant assets, and intangible assets.

Permanent accounts carry their balances into the next accounting period.

Flo's Flowers' current ratio is 1.3. The industry average for the current ratio is 1.2. This indicates that Flo's can cover its short term liabilities with its short term assets.

If a prepaid expense account was not adjusted for the amount used, on the balance sheet assets would be _ and equity would be _.

On January 1 a company purchased a five-year insurance policy for $1,800 with coverage starting immediately. If the purchase was recorded in the Prepaid Insurance account, and the company records adjustments only at year-end, the adjusting entry at the end of the first year is:

When there is a net loss the Income Summary account would have a credit balance.

On the work sheet, net income is entered in the Income Statement Credit column as well as the Balance Sheet Credit column.

The adjusted trial balance must be prepared before the adjusting entries are made.

Which of the following is classified as current assets?

The adjusted trial balance contains information pertaining to:

Explain how accounting adjustments affect financial statements and provide an example of an adjustment that would impact the statements if not recorded.

If a company reporting on a calendar year basis, paid $18,000 cash on January 1 for one year of rent in advance and adjusting entries are made at the end of each month, the balance remaining in Prepaid Rent on December 1 should be $1,500.

The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is:

Explain the purpose of adjusting entries at the end of a period and provide an example of an adjusting entry.

The trial balance prepared after all closing entries have been journalized and posted is called the:

Depreciation measures the decline in market value of an asset.

Assets, liabilities, and equity accounts are not closed; these accounts are called:

Adjusting entries are necessary so that asset, liability, revenue, and expense account balances are correctly recorded.

Accounting in Business

Accounting for Business Transactions

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash and Internal Controls

Accounting for Receivables

Accounting for Long-Term Assets

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Corporate Reporting and Analysis

Filters

Exam 3: Adjusting Accounts for Financial Statements

Assets are often classified into current assets, long-term investments, plant assets, and intangible assets.

Permanent accounts carry their balances into the next accounting period.

Flo's Flowers' current ratio is 1.3. The industry average for the current ratio is 1.2. This indicates that Flo's can cover its short term liabilities with its short term assets.

If a prepaid expense account was not adjusted for the amount used, on the balance sheet assets would be ___________________ and equity would be ___________________.

On January 1 a company purchased a five-year insurance policy for $1,800 with coverage starting immediately. If the purchase was recorded in the Prepaid Insurance account, and the company records adjustments only at year-end, the adjusting entry at the end of the first year is:

When there is a net loss the Income Summary account would have a credit balance.

On the work sheet, net income is entered in the Income Statement Credit column as well as the Balance Sheet Credit column.

The adjusted trial balance must be prepared before the adjusting entries are made.

Which of the following is classified as current assets?

The adjusted trial balance contains information pertaining to:

Explain how accounting adjustments affect financial statements and provide an example of an adjustment that would impact the statements if not recorded.

If a company reporting on a calendar year basis, paid $18,000 cash on January 1 for one year of rent in advance and adjusting entries are made at the end of each month, the balance remaining in Prepaid Rent on December 1 should be $1,500.

The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is:

Explain the purpose of adjusting entries at the end of a period and provide an example of an adjusting entry.

The trial balance prepared after all closing entries have been journalized and posted is called the:

Depreciation measures the decline in market value of an asset.

Assets, liabilities, and equity accounts are not closed; these accounts are called:

Adjusting entries are necessary so that asset, liability, revenue, and expense account balances are correctly recorded.

Accounting in Business

Accounting for Business Transactions

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash and Internal Controls

Accounting for Receivables

Accounting for Long-Term Assets

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Corporate Reporting and Analysis

Filters

If a prepaid expense account was not adjusted for the amount used, on the balance sheet assets would be _ and equity would be _.