Deck 3: Review of a Companys Accounting System

Question 1

Which of the following is an economic resource that should be depreciated over the accounting periods estimated to be benefited?

A)salaries incurred but unpaid at year-end
B)rent collected in advance for a three-year rental period
C)equipment purchased for use in the business operations
D)interest revenue accrued on investment in bonds

Answer 1

C

Question 2

A prepaid expense is

A)a payment received by the company in advance for the future sale of inventory or performance of services
B)an item of goods or services purchased by the company for use in its operations but not fully consumed by the end of the accounting period
C)an expense that has been incurred during the accounting period but has been neither paid nor recorded
D)an item that has been earned by the company during the accounting period but has been neither received nor recorded

Answer 2

B

Question 3

Which of the following is a contra account?

A)Unearned Rental Revenue
B)Sales Discounts Taken
C)Bad Debts Expense
D)Depreciation Expense

Answer 3

B

Question 4

The Cosmo Construction Company received $12, 000 for six months rental income in advance on November 1, 2010, and credited the Rental Revenue account.The required adjusting entry on December 31, 2010, would include a

A)credit to Rental Revenue for $4, 000
B)debit to Rental Revenue for $8, 000
C)credit to Rental Receivable for $8, 000
D)debit to Rental Revenue for $4, 000

Question 5

An example of a transposition is

A)presenting the cash account at $1, 600 instead of $16, 000
B)presenting prepaid insurance at $710 instead of $170
C)incorrectly posting a credit amount as a debit amount in the general ledger
D)not journalizing a sales transaction at all

Question 6

Which of the following is a nominal account?

A)Retained Earnings
B)Accounts Receivable
C)Purchases Returns and Allowances
D)Accumulated Depreciation

Question 7

Which accounts are increased with debits?

A)Cost of Goods Sold, Capital Stock, Assets
B)Dividends, Revenue, Liabilities
C)Assets, Cost of Goods Sold, Dividends Distributed
D)Liabilities, Capital Stock, Revenue

Question 8

Which of the following rules is incorrect?

A)The accounting equation must always remain in balance.
B)Asset accounts are increased by debit entries and decreased by credit entries.
C)Expense accounts normally have debit balances.
D)Capital stock accounts are increased by debit entries and decreased by credit entries.

Question 9

When you prepare a journal entry, the standard format is to list all

A)asset accounts first
B)accounts to be debited first
C)liability accounts first
D)accounts to be credited first

Question 10

Which of the following adjusting entries involves the recognition of an accrued expense?

A)recording depreciation on a long-lived asset
B)writing off the portion of an insurance policy that has expired
C)recognition of salaries owed to employees for work done during the current period that will be paid during the next accounting period
D)recognition of bad debt losses that are expected to result from making sales on credit terms

Question 11

Which of the following errors will be detected by a trial balance?

A)posting a credit to Sales instead of to Accounts Payable
B)incorrectly computing the balance of the cash account
C)failure to journalize a sales transaction at all
D)forgetting to post a purchase transaction at all

Question 12

Information related to the Franklin Company for the calendar year 2010 follows: $\begin{array}{ll}\text { Liabilities, December } 31,2010 & \$ 400 \\\text { Assets, December } 31,2010 & 700 \\\text { Dividends clistributed during } 2010 & 90 \\\text { Liabilities, December } 31,2009 & 250 \\\text { Asssets, December } 31,2009 & 350\end{array}$ Assuming no capital stock was issued during 2010, the net income earned by the Jones Company during 2010 was

A)$110
B)$200
C)$260
D)$290

Question 13

On March 31, 2010, the Trident Company purchased a two-year fire insurance policy.Tricot recorded the purchase by debiting Prepaid Insurance and crediting Cash for $12, 000.Which of the following adjusting entries should Trident prepare at the end of 2010?

A)
$\begin{array}{ll}\text { Prepaid Insurance } & 4,500 \\\text { Insurance Expense } & 4,500\end{array}$
B)
$\begin{array}{cr}\text { Insurance Expense } & 4,500 \\\text { Prepaid Insurance } & 4,500\end{array}$
C)
$\begin{array}{lr}\text { Prepaid Insurance } & 7,500 \\\text { Insurance Expense } & 7,500\end{array}$
D)
$\begin{array}{cr}\text { Insurance Expense } & 7,500 \\\text { Prepaid Insurance } & 7,500\end{array}$

Question 14

Adjusting entries are made

A)to match the consumption of prepaid assets against current revenues
B)to record accrued expenses
C)to record estimated items, such as depreciation
D)for all of these reasons

Question 15

The basic purpose of a trial balance is to

A)list all of the accounts in the general ledger
B)list all of the accounts in the general ledger that have a balance
C)be sure that all journal entries have been recorded
D)verify that the total credits equal the total debits

Question 16

Which of the following statements regarding a post-closing trial balance is not true?

A)Post-closing trial balances only contain permanent accounts.
B)Balances in a post-closing trial balance cannot be used to calculate current income.
C)Post-closing trial balances only contain temporary accounts.
D)A post-closing trial balance verifies that the total of the debit balances equals the total of the credit balances of all accounts in the general ledger.

Question 17

The entire group of accounts for a company is referred to as the

A)general ledger
B)worksheet
C)journal
D)document of original entry

Question 18

What relationship exists between the general journal and the general ledger?

A)The general ledger accounts contain the same information as in the general journal, just in a different format.
B)The balances in the general ledger will always equal those in the general journal.
C)After all postings from the general journal are complete, the debit balances in the general ledger will rarely equal the credit balances.
D)The number of accounts in the general journal will always be larger than the number of accounts in the general ledger.

Question 19

Which of the following is a permanent account?

A)Dividends Distributed
B)Allowance for Doubtful Accounts
C)Interest Expense
D)Sales

Question 20

In terms of debits and credits, which types of accounts will have the same (debit or credit)normal balances?

A)dividends, expenses, assets
B)assets, capital stock, revenues
C)retained earnings, dividends, liabilities
D)expenses, liabilities, capital stock

Question 21

Rental receipts for the period July 1, 2010, through June 30, 2011, were collected on June 30, 2010.The effects of these economic events on the 2010 financial statements for unearned revenue and rent revenue are $\begin{array}{ll}&\text { Unearned Revenue } & \text { Rent Revenue } \\\hline I.&\text { Increase } & \text { Increase } \\II.&\text { Increase } & \text { Decrease } \\III.&\text { Decrease } & \text { No effect } \\IV.&\text { Decrease } & \text { Increase }\end{array}$

A)I
B)II
C)III
D)IV

Question 22

Prior to preparing the organization's financial statements, the accountant prepares

A)a balance sheet
B)a trial balance
C)an adjusted trial balance
D)a closed trial balance

Question 23

The balance in deferred (unearned)revenue accounts represents amounts that are $\begin{array}{ll}&\text { Earned }&\text { Collected }\\I.&\text { Yes } & \text { No } \\II.&\text { Yes } & \text { Yes } \\III.&\text { No } & \text { No } \\IV.&\text { No } & \text { Yee }\end{array}$

A)I
B)II
C)III
D)IV

Question 24

On May 1, 2010, Arch Corporation borrowed $2, 500 on a two-year, 6% note payable.Interest is due and payable at the end of each six months.Arch makes all interest payments on schedule.The correct December 31, 2010, adjusting entry would be

A)
$\begin{array}{lll}\text { Interest Expense } & 25 & \\\text { Interest Payable } & & 25\end{array}$
B)
$\begin{array}{cc}\text { Interest Payable } & 100 \\\text { Cash } && 100\end{array}$
C)
$\begin{array}{lr}\text { Interest Expense } & 25 \\\text { Cash } && 25\end{array}$
D)
$\begin{array}{lrr}\text { Interest Expense } & 100 \\\text { Interest Payable } & & 100\end{array}$

Question 25

An adjusting entry normally affects

A)balance sheet accounts only
B)income statement accounts only
C)an income statement account and a balance sheet account
D)balance sheet accounts or income statement accounts only

Question 26

The Victor Company rents numerous properties throughout the year.Victor pays rents in advance in some cases, and in others, rents are paid after the rental period expires.The following data are included in Victor's December 31 balance sheets: $\begin{array}{lll}&2010&2011\\\text { Prepaid Rents } & \$ 70,000 & \$ 30,000 \\\text { Rent Payable } & \$ 50,000 & \$ 35,000\end{array}$ During 2011, Victor paid $200, 000 in rentals.In its income statement for the year ended December 31, 2011, Victor should report rent expense of

A)$145, 000
B)$175, 000
C)$200, 000
D)$225, 000

Question 27

When cash is debited for rents that are collected but are not yet earned, the amount credited should be

A)recorded as revenue when collected
B)presented as a liability until earned
C)recorded as an asset until earned
D)presented as a separate item in stockholders' equity

Question 28

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

A)depreciation of long-term physical assets
B)allocation of unearned revenue
C)correction of an error in the general journal
D)recording of accrued revenue

Question 29

Posting is the procedure of transferring information from the

A)journal to the ledger
B)trial balance to the worksheet
C)ledger to the journal
D)worksheet to the financial statements

Question 30

On November 1, 2010, the Morrison Company purchased a two-year umbrella insurance policy for $3, 000 and recorded the transaction by debiting Prepaid Insurance and crediting Cash.Which of the following adjusting entries would be used by Morrison to properly account for prepaid insurance on December 31, 2010?

A)
$\begin{array} { c c } \text { Insurance Expense } & 250 \\\text { Prepaid Insurance } & 250\end{array}$
B)
$\begin{array}{lr}\text { Prepaid Insurance } & 2,750 \\\text { Insurance Expense } & 2,750\end{array}$
C)
Insurance Expense $\quad 250$
Accumulated Amortization-Insurance $\quad 250$
D)
$\begin{array}{lc}\text { Prepaid Insurance } & 1,250 \\\text { Cash } & 1,250\end{array}$

Question 31

On April 1, 2010, Milligan Company paid $5, 280 for a two-year insurance policy.On that date, the company charged an asset account.The correct December 31, 2010, adjusting entry would be

A)
$\begin{array}{cc}\text { Prepaid Insurance } & 3,300 \\\text { Insurance Expense } && 3,300\end{array}$
B)
$\begin{array}{cr}\text { Insurance Expense } & 1,980 \\\text { Prepaid Insurance } && 1,980\end{array}$
C)
Prepaid Insurance $\quad 1,980$
Insurance Expense $\quad 1,980$
D)
$\begin{array}{cc}\text { Insurance Expense } & 3,300 \\\text { Prepaid Insurance } & 3,300\end{array}$

Question 32

On August 1, 2010, Green Company paid $4, 320 for a three-year insurance policy.On that date, an expense account was charged.In the adjusting entry on December 31, 2010, there would be a

A)debit to Insurance Expense for $600
B)credit to Prepaid Insurance for $600
C)credit to Prepaid Insurance for $480
D)credit to Insurance Expense for $3, 720

Question 33

The Rogers Company uses the straight-line method to depreciate its equipment.On May 1, 2010, the company purchased some equipment for $200, 000.The equipment is estimated to have a useful life of ten years and a salvage value of $20, 000.If depreciation is to be recorded for each month the equipment is owned, how much depreciation expense should Rogers record for the equipment in the adjusting entry on December 31, 2010?

A)$18, 000
B)$13, 500
C)$12, 000
D)$ 6, 000

Question 34

The accountant failed to make the adjusting entry to record the amount of interest owed on a note to the bank at the end of the year.This error would cause an overstatement of

A)assets
B)expenses
C)liabilities
D)owners' equity

Question 35

On February 1, 2010, Zeus Company received $36, 000 in advance for a three-year rental of land, and credited Rent Revenue.The correct December 31, 2010 adjusting entry would be

A)
$\begin{array}{cr}\text { Unearned Rent } & 25,000 \\\text { Rent Revenue } & 25,000\end{array}$
B)
$\begin{array}{cr}\text { Rent Revenue } & 25,000 \\\text { Unearned Rent } & 25,000\end{array}$
C)
Unearned Rent $\quad 11,000$
Rent Revenue $\quad 11,000$
D)
$\begin{array}{lr}\text { Rent Revenue } & 11,000 \\\text { Unearned Rent } & 11,000\end{array}$

Question 36

On June 1, 2010, Whipple Corporation received $2, 520 in advance for a two-year rental of some land and properly credited Unearned Rent.In the adjusting entry at December 31, 2010, there would be a

A)debit to Unearned Rent for $630
B)credit to Rent Revenue for $735
C)credit to Unearned Rent for $735
D)debit to Unearned Rent for $2, 520

Question 37

An accrued expense is an expense

A)incurred but neither paid nor recorded
B)incurred, paid, and recorded
C)paid and recorded but not incurred
D)whose amount is subject to estimation

Question 38

Which of the following is an accrued expense?

A)depreciation
B)employees' salaries
C)interest revenue
D)rental expense paid three months in advance

Question 39

On June 1, 2010, Barker Industries purchased a one-year comprehensive insurance policy and paid the annual premium of $12, 000.Which of the following could not result from the acquisition of the insurance coverage on June 1?

A)$7, 000 of insurance expense for the year ended December 31, 2010
B)a $12, 000 debit to Insurance Expense on June 1, 2010
C)$5, 000 of prepaid insurance at December 31, 2010
D)a $12, 000 credit to Prepaid Insurance on June 1, 2010

Question 40

Accrued revenues

A)have been earned and collected, but not yet recorded
B)have been collected, but not yet earned or recorded
C)have been earned and recorded, but not yet collected
D)have been earned, but not yet collected or recorded

Question 41

On a worksheet, which account will not be extended to the Balance Sheet columns?

A)Unearned Rent
B)Inventory, January 1
C)Capital Stock
D)Accumulated Depreciation

Question 42

The Thomas Company has an accounts receivable account in its general ledger, and it also maintains a subsidiary ledger that contains an individual account for each of its customers who buys merchandise on credit.Which of the following statements about the general ledger account is not true?

A)The general ledger account is also called a contra account.
B)The balance of the general ledger account should agree with the total of all of the accounts in the subsidiary ledger.
C)The general ledger account is called a real or permanent account.
D)The general ledger account is properly referred to as a control account.

Question 43

Marge Company has all of the special journals that were described in your text (other than the voucher register)as a part of its accounting system.Which of the following journal entries would therefore be recorded in Marge's general journal?

A)an entry to record the sale of merchandise on credit
B)an entry to record the sale of inventory on credit
C)an entry to record the return of defective purchased merchandise for credit
D)an entry to record a cash purchase of inventory

Question 44

Which of the following adjusting entries would be the most likely to be reversed?

A)
$\begin{array}{ll}\text { Depreciation Expense } & 2,000 \\\text { Accumulated Depreciation } & 2,000\end{array}$
B)
Unearned Rent $\quad 600$
Rent Revenue $\quad 600$
C)
$\begin{array}{cc}\text { Insurance Expense } & 200 \\\text { Prepaid Insurance } & 200\end{array}$
D)
$\begin{array}{lr}\text { Income Tax Expense } & 450 \\\text { Income Taxes Payable } &\end{array}$

Question 45

The Yellow Company made year-end adjusting entries affecting each of the following accounts: Office Salaries Payable (credited); Depreciation Expense (debited); Unearned Rental Revenue (debited); and Prepaid Insurance (credited).Which account is likely to appear in Yellow's reversing entries?

A)Office Salaries Payable
B)Depreciation Expense
C)Unearned Rental Revenue
D)Prepaid Insurance

Question 46

On a worksheet, the balance in the accumulated depreciation account should be extended to which column?

A)Balance Sheet debit column
B)Balance Sheet credit column
C)Income Statement debit column
D)Income Statement credit column

Question 47

The accountant failed to make the adjusting entry to record the unpaid wages of its employees as of December 31.This error will cause

A)an overstatement of assets, liabilities, and owners' equity
B)an understatement of expenses, liabilities, and owners' equity
C)an understatement of liabilities and an overstatement of owners' equity
D)an understatement of assets and liabilities

Question 48

An organization will typically utilize a subsidiary ledger to

A)make sure all debits equal credits
B)make it easier to handle cash received from customers
C)keep customer accounts up to date
D)record customer credit sales outside of the normal double entry system

Question 49

The accountant failed to make the adjusting entry to record the depreciation for the year.This error would cause

A)an overstatement of assets
B)an overstatement of expenses
C)an understatement of liabilities
D)an understatement of owners' equity

Question 50

On October 1, 2010, Billy's Beach Umbrellas borrowed $2, 000 on a 12%, one-year note payable.Interest was payable semiannually.A correct adjusting entry was made on December 31, 2010, and a correct reversing entry was made on January 1, 2011.The entry that should be made on March 31, 2011, is

A)
$\begin{array}{cc}\text { Interest Payable } & 120 \\\text { Cash } & 120\end{array}$
B)
$\begin{array}{cc}\text { Interest Expense } & 60 \\\text { Interest Payable } & 60 \\\text { Cash } & 120\end{array}$
C)
$\begin{array}{cl}\text { Interest Expense } & 60 \\\text { Cash } & 60\end{array}$
D)
$\begin{array}{cc}\text { Interest Expense } & 120 \\\text { Cash } & 120\end{array}$

Question 51

Which statement is true?

A)All purchases should be recorded in a purchases journal.
B)Closing and reversing entries will be found in the sales journal.
C)Returned merchandise from a customer should be entered in the sales journal.
D)All cash sales should be recorded in the cash receipts journal.

Question 52

With closing entries, you would expect to find all of the following except

A)debit Unearned Rent; credit Income Summary
B)debit Sales Revenue; credit Income Summary
C)debit Income Summary; credit Dividends Distributed
D)debit Income Summary; credit Loss on Sale of Land

Question 53

When reconciling its accounts, Ajax Company found the accounts receivable general ledger account had a balance of $30, 000, and the accounts receivable subsidiary ledger account balances totaled $28, 000.The most likely reason for this difference was

A)a sale to a customer was recorded twice in the subsidiary ledger
B)cash received from a customer was posted twice to the subsidiary ledger
C)a sale to a customer was not posted to the general ledger
D)cash received from a customer was recorded twice in the general ledger

Question 54

Which statement is true?

A)In the Income Statement columns of a worksheet, if there is net income, it must be added to the credit column to make the two columns balance.
B)In the Retained Earnings columns of a worksheet, if there is a loss, it will be entered in the credit column to make the two columns balance.
C)In the Income Statement columns of a worksheet, if there is a net loss, it must be added to the credit column to make the two columns balance.
D)In the Retained Earnings columns of a worksheet, if there is net income, it will be entered in the debit column to make the two columns balance.

Question 55

The purpose of closing entries is to

A)update a periodic inventory account for credit sales
B)update the retained earnings account on a daily basis
C)apportion prepaid expenses and unearned revenues to bring the accounts up to date
D)reduce all temporary accounts to zero

Question 56

The total of the individual customer account balances should equal the balance in Accounts Receivable, which is the

A)control account
B)master account
C)nominal account
D)contra account

Question 57

Which of the following adjusting entries would not be reversed in the following accounting period?

A)an entry that recognized an accrued expense of the current period
B)an entry that allocated the expired portion of a long-lived asset to the current year's income statement
C)an entry that transferred a portion of a revenue account to a liability account
D)an entry that recognized an accrued revenue earned during the current period

Question 58

If the credit subtotal is greater than the debit subtotal in the Income Statement columns of a worksheet, the difference

A)indicates that the company incurred an operating loss during the period
B)could represent payment of dividends by the entity during the period
C)indicates that an error has been made in the accounting process
D)indicates that the company earned a net income during the period

Question 59

Which of the following accounts would not be closed to Income Summary during the year-end closing process?

A)Loss on Sale of Land
B)Prepaid Rent
C)Freight-In
D)Sales Discounts

Question 60

Which of the following transactions would be recorded in a sales journal of the type illustrated in the text?

A)customer return of merchandise originally bought on credit
B)customer purchase of merchandise for cash
C)sale by a used car dealer of part of the property surrounding his display lot
D)customer purchase of merchandise on credit terms

Question 61

Figure APC-2 is the condensed worksheet for the Ralph Company as of December 31, 2010.
Additional Information:
Required:
Complete the worksheet, assuming that adjusting entries are made only at December 31.

Question 62

The Waller Company uses the accrual basis of accounting.Waller Company's wages expense account had a $510, 000 balance at the end of the year.The wages payable account had a $23, 000 balance at the beginning of the year and a $45, 000 balance at the end of the year.How much cash was paid for wages during the year?

A)$488, 000
B)$510, 000
C)$532, 000
D)$555, 000

Question 63

Mantle Corporation has an accounting system that includes five journals: the sales, purchases, cash receipts, cash payments, and general journals.The following transactions occurred during the month of May.

Required:
Prepare (in general journal form)the journal entries necessary to record the above transactions, and indicate in which (special)journal they would have been recorded.

Question 64

The Mercer Company uses the cash basis of accounting.Mercer Company made $500, 000 in payments to its suppliers during the year.Mercer's beginning inventory was $20, 000, and its ending inventory was $35, 000.In addition, Mercer had a beginning accounts payable of $50, 000 and an ending accounts payable of $70, 000.What is Mercer's cost of goods sold under the accrual basis of accounting?

A)$465, 000
B)$495, 000
C)$505, 000
D)$535, 000

Question 65

The following information was taken from the accounting records of Ace Builders at the end of the year.
$\begin{array}{ll}\text { Land } & \$ 424 \\\text { Capital stock } & 850 \\\text { Inventory } & 156 \\\text { Accumulated depreciation-Building } & 180 \\\text { Liabilities } & 150 \\\text { Cash } & 20 \\\text { Allowance for doubtful accounts } & 16 \\\text { Retained earnings } & 244 \\\text { Building } & 760\end{array}$
Required:
Calculate the amount of gross accounts receivable.

Question 66

The Small Company uses the cash basis of accounting.Small Company made $28, 000 in payments to its suppliers during the year.Small's beginning inventory was $2, 000, and its ending inventory was $1, 000.In addition, Small had a beginning accounts payable of $7, 000 and an ending accounts payable of $4, 000.What is Small's cost of goods sold under the accrual basis of accounting?

A)$26, 000
B)$30, 000
C)$32, 000
D)$37, 000

Question 67

Which statement is not true?

A)The general journal is still a necessity, even when special journals are used.
B)If a cash payments journal is in use, postings are usually made only at the end of the month.
C)All transactions involving the receipt of cash are recorded in the cash receipts journal.
D)A purchase of a desk calculator for the office should not be recorded in the purchases journal.

Question 68

Several accounts are listed below:
Required:
List the accounts above that would normally have a credit balance.

Question 69

The Slaughter Company uses the cash basis of accounting.Slaughter Company collected $850, 000 from its customers during 2010.Customers owed Slaughter $50, 000 of accounts receivable at the beginning of 2010, and $90, 000 of accounts receivable at the end of 2010.What is Slaughter's sales revenue for 2010 under the accrual basis of accounting?

A)$810, 000
B)$850, 000
C)$890, 000
D)$940, 000

Question 70

Several transactions for Menlo Co.are presented below.The company adjusts its books only at year-end.
a. On February 1, Menlo Co. leased a warehouse to another company for $\$ 36,000$ for a three-year period. The company credited a revenue account on Februaty 1 when the total amount of $\$ 36,000$ was received in cash
b. On September 1, Menlo Co. paid $\$ 4,800$ to a local trucking company for certain deliveries each day over a two-year period of time. The company charged an asset account on September 1.
c.On May 1 , the company borrowed $\$ 10,000$ on an $8 \%$ , one-year note.
d.On March 10, Menlo Co. bought $\$ 180$ of office supplies and debited the office supplies account. At the beginning of the year; office supplies of $\$ 30$ were on hand and disclosed on the Januaty 1 balance sheet. At the end of the year, there were $\$ 46$ of office supplies on hand. Required:
Prepare adjusting entries for December 31.

Question 71

The following are selected data for the Young Company:
$\begin{array}{ll}\text { Administrative expenses } & \$ 120 \\\text { Beginning inventory } & 140 \\\text { Net sales } & 1,050 \\\text { Net income } & 130 \\\text { Encling inventory } & 180 \\\text { Sales returns } & 80 \\\text { Total operating expenses } & 380 \\\text { Purchases } & 600\end{array}$
Required:
Compute the following:
a. Sales
b. Purchase retumes
c. Selling expenses
d. Cost of goods sold

Question 72

Selected adjusting entries follow:
Required:
Indicate by Yes or No which of the preceding adjusting entries could be reversed.
a. $\underline{\quad\quad\quad\quad\quad\quad}$
b. $\underline{\quad\quad\quad\quad\quad\quad}$
c. $\underline{\quad\quad\quad\quad\quad\quad}$
d. $\underline{\quad\quad\quad\quad\quad\quad}$
e. $\underline{\quad\quad\quad\quad\quad\quad}$
f. $\underline{\quad\quad\quad\quad\quad\quad}$
g. $\underline{\quad\quad\quad\quad\quad\quad}$

Question 73

The Cutter, Inc.uses the accrual basis of accounting.Cutter's insurance expense account had a $25, 000 balance at the end of the year.The prepaid insurance account had a $5, 000 balance at the beginning of the year and a $1, 000 balance at the end of the year.How much cash was paid for insurance during the year?

A)$ 4, 000
B)$20, 000
C)$21, 000
D)$29, 000

Question 74

Several transactions for Buckner, Inc., are presented below.The company adjusts its books only at year-end.
a. On August 1, the company rented some land from another company for $\$ 2,160$ for a three-year time period. Buckner charged an expense account on August 1.
b. On Febuary 1, Buckner received $\$ 6,000$ for a four-ye ar techrical service contract. Buckner is performing the services evenly over the four-year period. The company credited a liability account on February 1.
c.On May 1, Buckner loaned $\$ 4,400$ to another company on a $12 \%$ , one-year note.
d.The weekly (five-day) payroll of Buckner amounts to $\$ 2,000$ . All employees are prid at the close of business each Friday. December 31 falls on a Thursday.
Required:
Prepare adjusting entries for December 31.

Question 75

Several accounts are listed below:
Required:
In the space to the left of each account, place a (P)if the account is a permanent (or real)account or a (T)if the account is a temporary account.

Question 76

Fox Corp.engaged in the following transactions during the month of June:
$\begin{array}{ll}\text { June } 1 & \text { Made cash sales of } \$ 8,000 \\5 & \text { Made credit sales of } \$ 21,000, \text { terms } 2 / 10, \mathrm{n} / 30 . \\9 & \text { Customers returned } \$ 500 \text { of merchandise from the June } 5 \text { sale because it was defective. } \\14 & \text { Received payment for balance due on the June } 5 \text { sale. } \\19 & \text { Sold land that had originally cost } \$ 8,500 \text { for } \$ 10,000 \text { cash }\end{array}$
Required:
Record these transactions in a general journal, assuming Fox uses a periodic inventory system.

Question 77

The Clipper, Inc., uses the accrual basis of accounting.Clipper's rent expense account had a $14, 000 balance at the end of the year.The prepaid rent account had a $5, 000 balance at the beginning of the year and a $7, 000 balance at the end of the year.How much cash was paid for rent during the year?

A)$ 7, 000
B)$ 9, 000
C)$12, 000
D)$16, 000

Question 78

Events concerning the Elton Company for 2010 are described below:
a. OnSeptember 1,2010 , a two-year comprehensive insurance policy was purchased for $\$ 3,600$ . The payment was debited to Prepaid Insurance.
OnDecember 1,2010, a customer paid $\$ 950$ in advance for services to be performed in Janury of 2011 . The payment was credited to Uneaned Revenue.
On Jamuary 1,2010, the office supplies ac count had a $\$ 250$ balance. Suppliescosting $\$ 2,500$ were purchased during the ye ar. At December 31, an invent out count showed $\$ 100$ of supplies on hand.
On December $31,2010, \$ 3,200$ of unped employee salaries had accumulated. No entry for these salaries has been recorded. Straight-line depreciation is recorded only at year-end and is being used for a building that was purchased at the beginning of 2005 for $\$ 25,000$ , with an expected life of 30 years and an estimated resichial value of $\$ 2,500$ .
The income tax rate is $30 \%$ on current income. Pretax income before the above adjusting entries was $\$ 38,700$ .
Required:
Prepare the appropriate December 31, 2010, adjusting entry for each item, or indicate that an adjusting entry is not necessary.Assume that Elton's transactions were initially recorded in real (balance sheet)accounts unless otherwise indicated.

Question 79

Triple Play Company engaged in the following transactions during the month of August:
August $4 \quad$ Purchased $\$ 2,000$ of merchandise on account, terms $1 / 10,12 / 30$ .
5 $\quad$ Returned $\$ 300$ of the merchandise purchased on Aug 4 because it was defective.
6 $\quad$ Purchased a machine for $\$ 4,000$ . Paid $20 \%$ down and signed an $8 \%$ , two-month note for the balance
8 $\quad$ Purchased $\$ 800$ of merchanchse and paid $\$ 820$ , which included freight.
13 $\quad$ Paid the balance due on the purchase of Aug 4 .

Required:

Record these transactions in a general journal, assuming Triple Play uses a periodic inventory system.

Question 80

Figure APC-1 is the condensed worksheet for the Ajax Company as of December 31, 2010.
Additional Information:
Required:
Complete the worksheet, assuming that adjusting entries are made only at December 31, 2010.