Question 1

Recording expenses early overstates current-period income; recording expenses late understates current period income.

Accepted Answer

A) True 
 B)False  False

Question 2

Prepaid expenses,depreciation,accrued expenses,unearned revenues,and accrued revenues are all examples of:

Accepted Answer

A) Items that require contra accounts. 
B) Items that require adjusting entries. 
C) Asset and equity. 
D) Asset accounts. 
E) Income statement accounts. 
A) Items that require contra accounts. 
B) Items that require adjusting entries. 
C) Asset and equity. 
D) Asset accounts. 
E) Income statement accounts. B

Question 3

What are the types of adjusting entries used for accrued expenses and accrued revenues?

Accepted Answer

Accrued expenses are expenses that have been incurred but not yet paid for.Adjusting entries for accrued expenses increase expenses and also increase liabilities to recognize that an expense has been incurred but not yet paid.Accrued revenues are revenues that have been earned but not yet received in cash.The adjusting entry recognizes the revenue and also establishes a receivable.

Question 4

Prepare adjusting entries for the year ended December 31,for each of these separate situations.Assume that prepaid expenses are initially recorded in asset accounts and that fees collected in advance are initially recorded as liabilities.
a.The Prepaid Rent account has a debit balance of $12,000 before adjustment,representing a prepayment for four months rent made on December 1 of the current year.
b.One-third of the work related to $18,000 of cash received in advance was performed during this period.
c.Unpaid accrued salaries at December 31 amounts to $15,000
d.Work was completed for a client on December 31 in the amount of $21,000,but was not previously billed or recorded.
e.Estimated depreciation on office equipment is $27,000.

Accepted Answer

The answer of Prepare adjusting entries for the year ended...

Question 5

Topflight Company had $1,500 of store supplies at the beginning of the current year.During this year,Topflight purchased $8,250 worth of store supplies.On December 31,$1,125 worth of store supplies remained.Calculate the amount of Topflight Company's store supplies expense for the current year.

Accepted Answer

$1,500 + $

Question 6

A company owes its employees $5,000 for the year ended December 31.It will pay employees on January 6 for the previous two weeks' salaries.The year-end adjusting on entry on December 31 will include a debit to Salaries Expense and a credit to Cash.

Accepted Answer

A) True 
 B)False

Question 7

A company had no office supplies available at the beginning of the year.During the year,the company purchased $250 worth of office supplies.On December 31,$75 worth of office supplies remained.How much should the company report as office supplies expense for the year?

Accepted Answer

A) $75. 
B) $125. 
C) $175. 
D) $250. 
E) $325. 
A) $75. 
B) $125. 
C) $175. 
D) $250. 
E) $325.

Question 8

List the three-steps of the adjusting process.

Accepted Answer

(1)Compute the current account

Question 9

During the current year ended December 31,clients paid fees in advance for accounting services amounting to $25,000.These fees were recorded in an account called Unearned Accounting Fees.If $3,500 of these fees remain unearned on December 31 of this year present the December 31 adjusting entry to bring the accounts up to date.

Accepted Answer

The answer of During the current year ended December 31,clients...

Question 10

_____________ expenses are those costs that are incurred in a period but are both unpaid and unrecorded.

Accepted Answer

The answer of _____________ expenses are those costs that are...

Question 11

The following unadjusted and adjusted trial balances were taken from the current year's accounting system for High Point.
   In general journal form,present the six adjusting entries that explain the changes in the account balances from the unadjusted to the adjusted trial balance.

Accepted Answer

The answer of The following unadjusted and adjusted trial balances...

Question 12

The balance in the prepaid insurance account before adjustment at the end of the year is $4,800,which represents the insurance premiums for four months.The premiums were paid on November 1.The adjusting entry required on December 31 is:

Accepted Answer

A) Debit Insurance Expense, $2,400; credit Prepaid Insurance, $2,400. 
B) Debit Prepaid Insurance, $2,400; credit Insurance Expense, $2,400. 
C) Debit Insurance Expense, $1,200; credit Prepaid Insurance, $1,200. 
D) Debit Prepaid Insurance, $1,200; credit Insurance Expense, $1,200 
E) Debit Cash, $4,800; Credit Prepaid Insurance, $4,800. 
A) Debit Insurance Expense, $2,400; credit Prepaid Insurance, $2,400. 
B) Debit Prepaid Insurance, $2,400; credit Insurance Expense, $2,400. 
C) Debit Insurance Expense, $1,200; credit Prepaid Insurance, $1,200. 
D) Debit Prepaid Insurance, $1,200; credit Insurance Expense, $1,200 
E) Debit Cash, $4,800; Credit Prepaid Insurance, $4,800.

Question 13

The adjusting entry to record an accrued expense is:

Accepted Answer

A) Increase an expense; increase a liability. 
B) Increase an asset; increase revenue. 
C) Decrease a liability; increase revenue. 
D) Increase an expense; decrease an asset. 
E) Increase an expense; decrease a liability. 
A) Increase an expense; increase a liability. 
B) Increase an asset; increase revenue. 
C) Decrease a liability; increase revenue. 
D) Increase an expense; decrease an asset. 
E) Increase an expense; decrease a liability.

Question 14

A broad principle that requires identifying the activities of a business with specific time periods such as months,quarters,or years is the:

Accepted Answer

A) Operating cycle of a business. 
B) Time period assumption. 
C) Going-concern assumption. 
D) Matching principle. 
E) Accrual basis of accounting. 
A) Operating cycle of a business. 
B) Time period assumption. 
C) Going-concern assumption. 
D) Matching principle. 
E) Accrual basis of accounting.

Question 15

Profit margin can also be called return on sales.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements is incorrect?

Accepted Answer

A) Adjustments to prepaid expenses, depreciation, and unearned revenues involve previously recorded assets and liabilities. 
B) Accrued expenses and accrued revenues involve assets and liabilities that had not previously been recorded. 
C) Adjusting entries can be used to record both accrued expenses and accrued revenues. 
D) Prepaid expenses, depreciation, and unearned revenues often require adjusting entries to record the effects of the passage of time. 
E) Adjusting entries affect the cash account. 
A) Adjustments to prepaid expenses, depreciation, and unearned revenues involve previously recorded assets and liabilities. 
B) Accrued expenses and accrued revenues involve assets and liabilities that had not previously been recorded. 
C) Adjusting entries can be used to record both accrued expenses and accrued revenues. 
D) Prepaid expenses, depreciation, and unearned revenues often require adjusting entries to record the effects of the passage of time. 
E) Adjusting entries affect the cash account.

Question 17

A contra account is an account linked with another account; it is added to that account to show the proper amount for the item recorded in the associated account.

Accepted Answer

A) True 
 B)False

Question 18

On October 15,a company received $15,000 cash as a down payment on a consulting contract.The amount was credited to Unearned Consulting Revenue.By October 31,10% of the services required by the contract were completed.The company will record consulting revenue of $1,500 from this contract for October.

Accepted Answer

A) True 
 B)False

Question 19

A company earned $2,000 in net income for October.Its net sales for October were $10,000.Its profit margin is:

Accepted Answer

A) 2%. 
B) 20%. 
C) 200%. 
D) 500%. 
E) $8,000. 
A) 2%. 
B) 20%. 
C) 200%. 
D) 500%. 
E) $8,000.

Question 20

Profit margin measures the relation of debt to assets.

Accepted Answer

A) True 
 B)False

Exam 3: Adjusting Accounts and Preparing Financial Statements

Recording expenses early overstates current-period income; recording expenses late understates current period income.

Prepaid expenses,depreciation,accrued expenses,unearned revenues,and accrued revenues are all examples of:

What are the types of adjusting entries used for accrued expenses and accrued revenues?

Topflight Company had $1,500 of store supplies at the beginning of the current year.During this year,Topflight purchased $8,250 worth of store supplies.On December 31,$1,125 worth of store supplies remained.Calculate the amount of Topflight Company's store supplies expense for the current year.

A company owes its employees $5,000 for the year ended December 31.It will pay employees on January 6 for the previous two weeks' salaries.The year-end adjusting on entry on December 31 will include a debit to Salaries Expense and a credit to Cash.

A company had no office supplies available at the beginning of the year.During the year,the company purchased $250 worth of office supplies.On December 31,$75 worth of office supplies remained.How much should the company report as office supplies expense for the year?

List the three-steps of the adjusting process.

_____________ expenses are those costs that are incurred in a period but are both unpaid and unrecorded.

The following unadjusted and adjusted trial balances were taken from the current year's accounting system for High Point. In general journal form,present the six adjusting entries that explain the changes in the account balances from the unadjusted to the adjusted trial balance.

The balance in the prepaid insurance account before adjustment at the end of the year is $4,800,which represents the insurance premiums for four months.The premiums were paid on November 1.The adjusting entry required on December 31 is:

The adjusting entry to record an accrued expense is:

A broad principle that requires identifying the activities of a business with specific time periods such as months,quarters,or years is the:

Profit margin can also be called return on sales.

Which of the following statements is incorrect?

A contra account is an account linked with another account; it is added to that account to show the proper amount for the item recorded in the associated account.

A company earned $2,000 in net income for October.Its net sales for October were $10,000.Its profit margin is:

Profit margin measures the relation of debt to assets.

Accounting in Business

Analyzing and Recording Transactions

Completing the Accounting Cycle

Accounting for Merchandising Operations

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Time Value of Money B

Activity-Based Costing C

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