Question 1

The entry to record depreciation includes a debit to which account?

Accepted Answer

A) Cash 
B) Depreciation expense 
C) Equipment 
D) Accumulated depreciation 
A) Cash 
B) Depreciation expense 
C) Equipment 
D) Accumulated depreciation

Question 2

A company received $5 000 for 100 one- year subscriptions on 1 July. The journal entry to record this cash receipt would include a:

Accepted Answer

A) credit to Unearned revenue. 
B) debit to Prepaid expenses. 
C) debit to Unearned revenue. 
D) credit to Cash. 
A) credit to Unearned revenue. 
B) debit to Prepaid expenses. 
C) debit to Unearned revenue. 
D) credit to Cash.

Question 3

In the case of Unearned revenue, the adjusting entry at the end of the period includes a debit to Service revenue.

Accepted Answer

A) True 
 B)False

Question 4

Hank's Tax Planning Service bought computer equipment for $19 200 on 1 January 2013. It has an estimated useful life of 4 years. Hank records depreciation monthly. As of 30 September 2013, Hank has recorded total depreciation expense for this equipment of:

Accepted Answer

A) $2 400. 
B) $14 400. 
C) $3 600. 
D) $400. 
A) $2 400. 
B) $14 400. 
C) $3 600. 
D) $400.

Question 5

Robert Rogers, CPA performed accounting services for a client in June. A bill was mailed to the client on 29 June. Roberts received a cheque in the mail on 5 July. Which of the following accounts would appear on the income statement for the year ended 30 June?

Accepted Answer

A) Service revenue 
B) Prepaid expense 
C) Unearned revenue 
D) Accounts payable 
A) Service revenue 
B) Prepaid expense 
C) Unearned revenue 
D) Accounts payable

Question 6

Pattie's Event Planning Service has just prepared the unadjusted trial balance, which shows the following balances: Salary expense: Debit $8 000 Service revenues: Credit $3 000 Interest expense: 0
Late in this month, she began working with a new client, providing event planning services for an upcoming event. When the event is complete, in the following month, she will collect the full amount of $900 from her client. As of the end of this month, she has rendered one- third of the services covered by the contract. She makes accrual adjustments monthly. The final adjusted balance of Service revenues, as shown on the adjusted trial balance, should be a:

Accepted Answer

A) credit balance of $3 300. 
B) debit balance of $300. 
C) debit balance of $3 300. 
D) credit balance of $3 900. 
A) credit balance of $3 300. 
B) debit balance of $300. 
C) debit balance of $3 300. 
D) credit balance of $3 900.

Question 7

Prepaid insurance is an asset account.

Accepted Answer

A) True 
 B)False

Question 8

Entries that record revenues earned before the cash is collected are:

Accepted Answer

A) accrued revenues. 
B) accrued expenses. 
C) prepaid expenses. 
D) unearned revenues. 
A) accrued revenues. 
B) accrued expenses. 
C) prepaid expenses. 
D) unearned revenues.

Question 9

On 31 December 2012, the balance in Pinnacle Exploration Company's Unearned revenue account is credit of $4 200. In January 2013, the company received an advance payment of $12 000 from a new customer for services to be performed. By 31 January, adjustments had been made to recognise $8 500 of the revenue which had been earned during January. What would be the balance in Unearned revenue on 31 January 2013?

Accepted Answer

A) $3 500 credit 
B) $7 700 credit 
C) $16 200 credit 
D) $8 500 debit 
A) $3 500 credit 
B) $7 700 credit 
C) $16 200 credit 
D) $8 500 debit

Question 10

What type of account is Prepaid rent and what is its normal balance?

Accepted Answer

A) Revenue and credit 
B) Asset and debit 
C) Liability and credit 
D) Expense and debit 
A) Revenue and credit 
B) Asset and debit 
C) Liability and credit 
D) Expense and debit

Question 11

Hank's Tax Planning Service bought communications equipment for $7 200 on 1 January 2013. It has an estimated useful life of 5 years. Hank records depreciation monthly. As of 30 June 2013, Hank's balance sheet will show a carrying value for this equipment of:

Accepted Answer

A) $120. 
B) $7 200. 
C) $720. 
D) $6 480. 
A) $120. 
B) $7 200. 
C) $720. 
D) $6 480.

Question 12

The accountant for Hobson Electrical Repair Company 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 TRUE?

Accepted Answer

A) Total assets are understated. 
B) Total assets are overstated. 
C) Total liabilities are understated. 
D) Total liabilities are overstated. 
A) Total assets are understated. 
B) Total assets are overstated. 
C) Total liabilities are understated. 
D) Total liabilities are overstated.

Question 13

The accountant for Wilson Consulting Company failed to make an adjusting entry to record $3 000 of unearned service revenue that has now been earned. Which of the following is TRUE?

Accepted Answer

A) Total assets are understated. 
B) Total assets are overstated. 
C) Total liabilities are overstated. 
D) Total liabilities are understated. 
A) Total assets are understated. 
B) Total assets are overstated. 
C) Total liabilities are overstated. 
D) Total liabilities are understated.

Question 14

Every time supplies are used during the accounting period, the asset 'supplies' should be reduced and the 'supplies expense' should be increased.

Accepted Answer

A) True 
 B)False

Question 15

Al Shonky wants to improve his profit to support a bank loan application. How might he achieve this ethically?

Accepted Answer

A) omit depreciation for this year 
B) pay the electricity bill before the due date 
C) recognise unearned revenue as income before providing goods to customers 
D) increase sales by opening his store an extra day each week 
A) omit depreciation for this year 
B) pay the electricity bill before the due date 
C) recognise unearned revenue as income before providing goods to customers 
D) increase sales by opening his store an extra day each week

Question 16

The accountant for Barnes Architectural Services failed to make an adjusting entry to record $7 000 of depreciation expense. Which of the following is TRUE?

Accepted Answer

A) Total expenses are understated. 
B) Total expenses are overstated. 
C) Total revenue is overstated. 
D) Total revenue is understated. 
A) Total expenses are understated. 
B) Total expenses are overstated. 
C) Total revenue is overstated. 
D) Total revenue is understated.

Question 17

Under cash- basis accounting, an expense is recorded ONLY when cash is paid out.

Accepted Answer

A) True 
 B)False

Question 18

Entries that record an expense before the cash is paid are:

Accepted Answer

A) prepaid expenses. 
B) accrued expenses. 
C) unearned revenues. 
D) accrued revenues. 
A) prepaid expenses. 
B) accrued expenses. 
C) unearned revenues. 
D) accrued revenues.

Question 19

Smith borrows $10 000 on a one- year loan payable that charges interest at 12% per year. He will repay the principal and interest at the end of the one- year period. Smith makes accrual adjustments and each month, he records interest expense of $1 200.

Accepted Answer

A) True 
 B)False

Question 20

Adjusting entries NEVER involve:

Accepted Answer

A) expenses. 
B) revenues. 
C) liabilities. 
D) cash. 
A) expenses. 
B) revenues. 
C) liabilities. 
D) cash.

Exam 3: The Adjusting Process

The entry to record depreciation includes a debit to which account?

A company received $5 000 for 100 one- year subscriptions on 1 July. The journal entry to record this cash receipt would include a:

In the case of Unearned revenue, the adjusting entry at the end of the period includes a debit to Service revenue.

Hank's Tax Planning Service bought computer equipment for $19 200 on 1 January 2013. It has an estimated useful life of 4 years. Hank records depreciation monthly. As of 30 September 2013, Hank has recorded total depreciation expense for this equipment of:

Robert Rogers, CPA performed accounting services for a client in June. A bill was mailed to the client on 29 June. Roberts received a cheque in the mail on 5 July. Which of the following accounts would appear on the income statement for the year ended 30 June?

Prepaid insurance is an asset account.

Entries that record revenues earned before the cash is collected are:

What type of account is Prepaid rent and what is its normal balance?

Hank's Tax Planning Service bought communications equipment for $7 200 on 1 January 2013. It has an estimated useful life of 5 years. Hank records depreciation monthly. As of 30 June 2013, Hank's balance sheet will show a carrying value for this equipment of:

The accountant for Hobson Electrical Repair Company 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 TRUE?

The accountant for Wilson Consulting Company failed to make an adjusting entry to record $3 000 of unearned service revenue that has now been earned. Which of the following is TRUE?

Every time supplies are used during the accounting period, the asset 'supplies' should be reduced and the 'supplies expense' should be increased.

Al Shonky wants to improve his profit to support a bank loan application. How might he achieve this ethically?

The accountant for Barnes Architectural Services failed to make an adjusting entry to record $7 000 of depreciation expense. Which of the following is TRUE?

Under cash- basis accounting, an expense is recorded ONLY when cash is paid out.

Entries that record an expense before the cash is paid are:

Smith borrows $10 000 on a one- year loan payable that charges interest at 12% per year. He will repay the principal and interest at the end of the one- year period. Smith makes accrual adjustments and each month, he records interest expense of $1 200.

Adjusting entries NEVER involve:

The Role of Accounting in Business

Recording Business Transactions

Completing the Accounting Cycle

Retailing Operations

Retail Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Non-Current Assets: Property, Plant and Equipment, and Intangibles

Current Liabilities and Payroll

Non-Current Liabilities, Debentures Payable and Classification of Liabilities on the Balance Sheet

Partnerships

Companies: Share Capital and the Balance Sheet

Companies: Effects on Retained Earnings, Share Splits and Buy-Backs, and the Income Statement

The Cash Flow Statement

The Framework of Accounting

Financial Statement Analysis

Introduction to Managerial Accounting and the Master Budget

Job Costing

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

Appendix

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