Deck 12: Accruals, Deferrals, and the Worksheet

Question 1

The debit and credit amounts for the Income Summary account are combined into one number in the Income Statement section of the worksheet.

Answer 1

False

Question 2

The balance of the Merchandise Inventory account shown in the Adjusted Trial balance section of the worksheet is extended to the Balance Sheet Debit column of the worksheet.

Answer 2

True

Question 3

When the accrual basis of accounting is used,expenses are recognized only in the period during which they are paid.

Answer 3

False

Question 4

Under the accrual basis of accounting,only income that has been earned appears on the income statement.

Question 5

The adjustment for merchandise inventory is made in ____________________ steps.

Question 6

The balance of the Merchandise Inventory account that appears in the Trial Balance section of the worksheet represents the stock of goods on hand at the beginning of the current period.

Question 7

A debit to Interest Receivable and a credit to Interest Income are needed to record interest that has been earned but not yet received.

Question 8

Merchandise inventory is adjusted in two steps because both the beginning and ending inventory figures are needed to prepare the income statement.

Question 9

The Merchandise Inventory account is debited when goods are purchased for resale and credited when goods are sold and delivered to customers.

Question 10

When an adjusting entry is made for supplies used,the Supplies Expense account is increased and the ____________________ account is decreased.

Question 11

The procedure that most nearly attains the objective of matching revenues and expenses to specific accounting periods is called the ____________________ basis of accounting.

Question 12

The entry to record the ending merchandise inventory in the books includes a ____________________ to the Merchandise Inventory account.

Question 13

To remove the beginning inventory from the books,the Income Summary account is credited for the amount of the beginning inventory.

Question 14

To determine the amount of yearly depreciation,the ____________________ is divided by the number of years in the asset's useful life.

Question 15

Under the accrual basis of accounting,the expense for uncollectible accounts is estimated and recorded before specific accounts are actually written off.

Question 16

The beginning merchandise inventory is removed from the books by closing the Merchandise Inventory account into the ____________________ account.

Question 17

The stock of goods that a business has on hand for sale to customers is called ___________________.

Question 18

Property,plant,and equipment are ____________________ assets that require end-of-period adjustments for depreciation.

Question 19

Uncollectible Accounts Expense is a(n)____________________ account.

Question 20

The objective of matching revenues and expenses to specific fiscal periods is most nearly attained when revenues and expenses are recognized in the period during which cash related to the transactions is received or paid.

Question 21

Net income is recorded on the net income line in the ___________________ column of the Balance Sheet section of the worksheet.

Question 22

On January 1,2016,a firm purchased machinery for $17,000.Depreciation expense for the year ending December 31,2016,given the straight-line method,a 5-year useful life,and a salvage value of $3,000,is

A) $3,000.
B) $3,400.
C) $2,800.
D) $2,400.

Question 23

On May 1,2016,a firm purchased a 1-year insurance policy for $3,600 and paid the full premium in advance.The insurance expense associated with this policy for the year ending December 31,2016,is

A) $3,600.
B) $2,400.
C) $2,100.
D) $1,200.

Question 24

The adjusting entry to record accrued interest on a note receivable increases the Interest Receivable account and ____________________ the Interest Income account.

Question 25

On the financial statements prepared at the end of an accounting period,the merchandise inventory is shown as

A) a liability on the balance sheet.
B) revenue on the income statement.
C) an asset on the balance sheet.
D) an addition to capital on the statement of owner's equity.

Question 26

Accrued expenses are

A) paid for in one period but not fully used until a later period.
B) used in one period but not paid for until a later period.
C) paid for,recorded,and used in one period.
D) budgeted but not paid for or used during the period.

Question 27

Which of the following statements is not correct?

A) Uncollectible Accounts Expense is a contra asset account.
B) The cost less the salvage value equals the depreciable base of a long-term asset.
C) Each adjustment for an accrued expense includes a credit to a liability account.
D) If a firm records prepaid expense items in an expense account when they pay for them,their adjustment at the end of the period to record the unexpired portion would include a debit to an asset account and a credit to an expense account.

Question 28

On June 1,2016,Mighty Fast Flooring issued a 10-month,9 percent note for $4,000.The note was recorded in the Notes Payable-Trade account.The adjusting entry on December 31 to record the interest accrued (owed)on the note is:

A) a debit to Interest Expense for $210 and a credit to Interest Payable for $210.
B) a debit to Interest Income for $210 and a credit to Interest Receivable for $210.
C) a debit to Interest Expense for $360 and a credit to Interest Payable for $360.
D) a debit to Interest Expense for $210 and a credit to Notes Payable-Trade for $210.

Question 29

If a company uses the periodic inventory system,purchases of merchandise are

A) debited to Merchandise Inventory.
B) credited to Merchandise Inventory.
C) debited to Purchases.
D) credited to Sales.

Question 30

Allowance for Doubtful Accounts is

A) subtracted from Accounts Receivable in the Assets section of the balance sheet.
B) deducted from Sales in the Revenue section of the income statement.
C) listed in the Operating Expenses section of the income statement.
D) listed in the Liabilities section of the balance sheet.

Question 31

On Oct 1,2016,a firm purchased a 1-year insurance policy for $2,400 and paid the full premium in advance.The adjustment needed on December 31,2016,to report the amount of insurance that had expired,would be:

A) a debit to Prepaid Insurance for $600 and a credit to Insurance Expense for $600.
B) a debit to Insurance Expense for $600 and a credit to Prepaid Insurance for $600.
C) a debit to Insurance Expense for $2,400 and a credit to Cash for $2,400.
D) a debit to Insurance Expense for $1,800 and a credit to Prepaid Insurance for $1,800.

Question 32

The adjusting entry to record accrued interest on a note payable requires a debit to

A) Interest Income and a credit to Notes Payable.
B) Interest Payable and a credit to Interest Expense.
C) Interest Expense and a credit to Cash.
D) Interest Expense and a credit to Interest Payable.

Question 33

During the year,Spirit Fun had net credit sales of $500,000.Past experience shows that 1.5 percent of the firm's net credit sales result in uncollectible accounts.Determine the adjusting entry needed to recognize the estimated expense for these uncollectible accounts.

A) debit Allowance for Doubtful Accounts $7,500 and credit Accounts Receivable $7,500.
B) debit Uncollectible Accounts Expense $7,500 and credit Accounts Receivable $7,500.
C) debit Uncollectible Accounts Expense $7,500 and credit Allowance for Doubtful Accounts $7,500.
D) debit Uncollectible Accounts Expense $75,000 and credit Allowance for Doubtful Accounts $75,000.

Question 34

An adjusting entry is usually not required for a revenue item when it is

A) budgeted,paid for,and partially earned in one period but not fully earned until a later period.
B) paid for by the customer,recorded,and earned in one period.
C) paid for by the customer and recorded in one period but not fully earned until a later period.
D) earned in one period but not paid for by the customer or recorded until a later period.

Question 35

Which of the following statements is correct?

A) Income that has been earned but not yet received is called accrued income.
B) Unearned Subscription Income is a liability account.
C) Under the accrual basis of accounting,revenue is recognized and recorded in the period when it is earned regardless of when cash related to the transaction is received.
D) All of these statements are correct.

Question 36

Allowance for Doubtful Accounts is reported in the

A) Assets section of the balance sheet.
B) Operating Expenses section of the income statement.
C) Liabilities section of the balance sheet.
D) Cost of Goods Sold section of the income statement.

Question 37

If an account has a debit balance in the Trial Balance section and a debit entry in the Adjustments section,_______________ the two amounts.

Question 38

The adjusting entry for uncollectible accounts requires a debit to

A) Allowance for Doubtful Accounts and a credit to Accounts Receivable.
B) Uncollectible Accounts Expense and a credit to Allowance for Doubtful Accounts.
C) Uncollectible Accounts Expense and a credit to Accounts Receivable.
D) Allowance for Doubtful Accounts and a credit to Uncollectible Accounts Expense.

Question 39

On January 2,2016,a firm purchased equipment for $8,500.Depreciation expense for the year ending December 31,2016,given the straight-line method,a 5-year useful life,and a salvage value of $1,500,is

A) $1,500.
B) $1,700.
C) $1,200.
D) $1,400.

Question 40

On July 1,2016,a firm purchased a 1-year insurance policy for $1,800 and paid the full premium in advance.The insurance expense associated with this policy for the year ending December 31,2016,is

A) $600.
B) $1,050.
C) $900.
D) $1,800.

Question 41

If an account has a debit balance of $700 in the Trial Balance section of a worksheet and there is a credit entry of $200 in the Adjustments section,the account balance in the Adjusted Trial Balance section of the worksheet is a

A) $900 debit.
B) $500 debit.
C) $500 credit.
D) $900 credit.

Question 42

If an account has a debit balance of $700 in the Trial Balance section of a worksheet and there is a debit entry of $200 in the Adjustments section,the account balance in the Adjusted Trial Balance section of the worksheet is a

A) $900 debit.
B) $500 debit.
C) $500 credit.
D) $900 credit.

Question 43

The trial balance of Marley Motorcycles shows Merchandise Inventory of $80,000.Based on a count taken on December 31,merchandise inventory at the end of the year actually totaled $92,000.The adjusting entry to place on the books,the new merchandise inventory balance would be:

A) a debit to Merchandise Inventory of $12,000 and a credit to Purchases for $12,000.
B) a debit to Merchandise Inventory of $92,000 and a credit to Income Summary for $92,000.
C) a debit to Purchases of $92,000 and a credit to Income Summary for $92,000.
D) a debit to Merchandise Inventory of 80,000 and a credit to Income Summary for $80,000.

Question 44

The net income for an accounting period can be determined using the worksheet by comparing the balances and determining the difference between the balances in the two

A) only the Income Statement columns.
B) Income Statement or Balance Sheet columns.
C) Balance Sheet and Income Statement Debit columns.
D) Balance Sheet and Income Statement Credit columns.

Question 45

The ending merchandise inventory is recorded on the worksheet in the

A) Income Statement Credit and the Balance Sheet Debit columns.
B) Income Statement Credit column only.
C) Balance Sheet Debit column only.
D) Income Statement Debit column only.

Question 46

The net income for an accounting period appears on the worksheet in the

A) Income Statement Debit column only.
B) Income Statement Credit column only.
C) Income Statement Credit and the Balance Sheet Debit columns.
D) Income Statement Debit and the Balance Sheet Credit columns.

Question 47

Robin Banks,Inc.owns an armored truck which was purchased for $80,000.The Accumulated Depreci­ation on the truck is $55,000.The book value of the armored truck is

A) $25,000.
B) $80,000.
C) $55,000.
D) $135,000.

Question 48

Rose Bush Nursery purchased a delivery truck for $27,000.The truck is expected to have a useful life of 4 years and a residual value of $1,080.If the truck was purchased on June 1,2016,what is the amount of depreciation expense for the truck for the year ended December 31,2016?

A) $3,780
B) $1,080
C) $6,480
D) $3,240

Question 49

The Supplies account has a trial balance of $3,136.A year-end inventory shows $1,734 worth of supplies left at the end of the year.The correct adjusting entry is:

A) debit Supplies Expense $1,734;credit Prepaid Supplies $1,734
B) debit Supplies $1,402;credit Supplies Expense $1,402
C) debit Supplies Expense $3,136;credit Supplies $3,136
D) debit Supplies Expense $1,402;credit Supplies $1,402

Question 50

On November 1,2016,Paige Turner Publishing received $50,400 in cash for subscriptions covering one year,recording the entry as a debit to Cash and a credit to Unearned Subscriptions.The correct adjusting entry at December 31,2016,is

A) Debit Subscriptions Income $8,400;credit Unearned Subscriptions $8,400.
B) Debit Unearned Subscriptions $8,400;credit Subscriptions Income $8,400.
C) Debit Unearned Subscriptions $4,200;credit Subscriptions Income $4,200.
D) Debit Unearned Subscriptions $50,400;credit Subscriptions Income $50,400.

Question 51

On November 1,2016,a firm accepted a 4-month,10 percent note for $900 from a customer with an overdue balance.The accrued interest recorded for this note for the year ended December 31,2016,is

A) $90.
B) $75.
C) $30.
D) $15.

Question 52

Hugh Morris Company pays weekly wages of $10,000 every Friday for a five day week ending on that day.If the last day of the year is on Wednesday,the adjusting entry to record the accrued wages is:

A) debit Wages Expense $6,000;credit Cash $6,000
B) debit Wages Expense $4,000;credit Cash $4,000
C) debit Wages Expense $6,000;credit Wages Payable $6,000
D) debit Wages Expense $6,000;credit Drawing $6,000

Question 53

With the accrual basis of accounting,it is appropriate to recognize revenue from a credit sale

A) on the date of the sale.
B) on the date the account is collected in full.
C) each time a payment on an account balance is received.
D) either on the date of the sale or when the amount of the sale is collected.

Question 54

After both of the entries for the inventory adjustment have been posted,the debit in the Income Summary account represents:

A) Net Income
B) Ending Inventory
C) Beginning Inventory
D) Cost of Goods Sold

Question 55

Accrued income is income that has been

A) received but not earned.
B) earned but not received.
C) earned and received.
D) budgeted for the fiscal period.

Question 56

Which of the following statements is correct?

A) On the worksheet,the amount of the ending merchandise inventory is shown in the Income Statement Credit column in the account Income Summary and the Balance Sheet Debit column in the account Merchandise Inventory.
B) On the worksheet,the totals of the Income Statement columns should equal the totals of the Balance Sheet columns.
C) On the worksheet,if debits exceed credits in the Adjusted Trial Balance section,the difference represents a net loss.
D) All of these statements are correct.

Question 57

On April 1,2016,a firm accepted a 3-month,10 percent note for $1,800 from a customer with an overdue balance.The accrued interest recorded for this note for the year ended May 31,2016,is

A) $30.
B) $60.
C) $150.
D) $180.

Question 58

If an account has a credit balance of $700 in the Trial Balance section of a worksheet and there is a credit entry of $200 in the Adjustments section,the account balance in the Adjusted Trial Balance section of the worksheet is

A) $900 debit.
B) $500 debit.
C) $500 credit.
D) $900 credit.

Question 59

On December 1,2016,a firm accepted a 6-month,12 percent note for $5,000 from a customer.The adjusting entry on December 31 to record the interest earned on the note is:

A) a debit to Interest Receivable for $600 and a credit to Interest Income for $600.
B) a debit to Interest Income for $600 and a credit to Interest Receivable for $600.
C) a debit to Interest Receivable for $60 and a credit to Interest Income for $60.
D) a debit to Interest Receivable for $300 and a credit to Interest Income for $300.

Question 60

The trial balance of Premier Lighting Co.shows Merchandise Inventory of $35,000.Based on a count taken on December 31,merchandise inventory at the end of the year actually totaled $28,000.The adjusting entry to remove the old merchandise inventory balance would be:

A) a debit to Income Summary of $28,000 and a credit to Merchandise Inventory for $28,000.
B) a debit to Merchandise Inventory of $28,000 and a credit to Income Summary for $28,000.
C) a debit to Purchases of $35,000 and a credit to Merchandise Inventory for $35,000.
D) a debit to Income Summary of $35,000 and a credit to Merchandise Inventory for $35,000.

Question 61

Determine the account and amount to be debited and the account and amount to be credited for the following adjustment.During the year,the firm had net credit sales of $490,000.Past experience shows that 1.2 percent of the firm's net credit sales result in uncollectible accounts.

Question 62

Determine the account and amount to be debited and the account and amount to be credited for the following adjustment.The beginning inventory for a merchandising business was $73,000,and the ending inventory is $66,000.

Question 63

Determine the account and amount to be debited and the account and amount to be credited for the following adjustment.The beginning inventory for a merchandising business was $32,000,and the ending inventory is $45,000.

Question 64

Abe & Anna Split Ice Cream Parlour paid $1,800 cash for a 6-month advertising contract on September 30,2013.The amount of advertising expense reported on the Income Statement for the year ending December 31,2016,for this advertising contract is

A) $900.
B) $300.
C) $1,800.
D) $1,200.

Question 65

Determine the account and amount to be debited and the account and amount to be credited for the following adjustment.During December,the firm received $6,000 in fees in advance and properly recorded the amount as Unearned Fees.An analysis shows that $2,000 applies to services provided in December.

Question 66

Determine the account and amount to be debited and the account and amount to be credited for the following adjustment.On December 31,2016,the firm owed wages totaling $4,300.

Question 67

On October 1,2016,a firm accepted a 4-month,8% note for $12,000 from a customer with an overdue account balance.The accrued interest recorded for this note on December 31,2016,is

A) $960.00.
B) $80.00.
C) $240.00.
D) No accrual is necessary.

Question 68

Determine the account and amount to be debited and the account and amount to be credited for the following adjustment.On October 1,2016,the firm paid a premium of $2,800 in cash for a 1-year insurance policy.On December 31,2016,coverage for a period of three months had expired.

Question 69

Determine the account and amount to be debited and the account and amount to be credited for the following adjustment.The Supplies account has a balance of $1,400.On December 31,2016,an inventory of supplies showed that items costing $500 were on hand.

Question 70

Determine the account and amount to be debited and the account and amount to be credited for the following adjustment.On December 31,2016,the firm owed wages totaling $3,900.

Question 71

Prepaid Advertising has a debit balance in the Trial Balance section of the worksheet of $1,500 and a credit entry of $500 in the adjustments section of the worksheet,the balance of Prepaid Advertising in the Adjusted Trial Balance section of the worksheet is a

A) $1,000 credit.
B) $500 debit.
C) $1,000 debit.
D) $1,500 debit.

Question 72

Millie's Bakery employees earn $450 a week for a five-day work week and are paid every Friday.If December 31 falls on a Wednesday,calculate the amount that is owed and select the adjusting entry needed to record the owed but unpaid salaries as of December 31.

A) a debit to Income Summary for $180 and a credit to Salaries Payable for $180.
B) a debit to Salaries Expense for $450 and a credit to Salaries Payable for $450.
C) a debit to Salaries Expense for $270 and a credit to Salaries Payable for $270.
D) a debit to Salaries Payable for $270 and a credit to Salaries Expense for $270.

Question 73

Determine the account and amount to be debited and the account and amount to be credited for the following adjustment.Equipment purchased for $52,000 on January 3,2016,has an estimated life of 5 years and an estimated salvage value of $4,500.The firm uses the straight-line method of depreciation.Determine the adjustment for the month ended January 31,2016.

Question 74

Determine the account and amount to be debited and the account and amount to be credited for the following adjustment.Equipment purchased for $104,000 on January 3,2016,has an estimated life of 5 years and an estimated salvage value of $9,000.The firm uses the straight-line method of depreciation.Determine the adjustment for the month ended January 31,2016.

Question 75

Stan Still Stationery Store's employees are paid every Friday for a five day work week and are paid a total of $1,250 per day.If December 31,2016,is on a Monday,the amount of the adjusting entry for accrued wages is:

A) $1,250
B) $5,000
C) $6,250
D) $3,750

Question 76

Determine the account and amount to be debited and the account and amount to be credited for the following adjustment.During the year,the firm had net credit sales of $980,000.Past experience shows that 1.2 percent of the firm's net credit sales result in uncollectible accounts.

Question 77

Determine the account and amount to be debited and the account and amount to be credited for the following adjustment.On October 1,2016,the firm paid a premium of $5,600 in cash for a 1-year insurance policy.On December 31,2016,coverage for a period of three months had expired.

Question 78

Determine the account and amount to be debited and the account and amount to be credited for the following adjustment.On December 31,2016,the Notes Payable account had a balance of $6,000.This represented a 3-month,9 percent note issued on December 1,2016.

Question 79

Determine the account and amount to be debited and the account and amount to be credited for the following adjustment.The Supplies account has a balance of $1,300.On December 31,2016,an inventory of supplies showed that items costing $550 were on hand.

Question 80

Determine the account and amount to be debited and the account and amount to be credited for the following adjustment.On December 31,2016,the Notes Payable account had a balance of $12,000.This represented a 3-month,9 percent note issued on December 1,2016.