Deck 4: The Accounting Cycle Continued

Question 1

If the Supplies account is NOT adjusted:

A) assets will be overstated and expenses will be understated.
B) assets will be overstated and expenses will be overstated.
C) assets will be understated and expenses will be overstated.
D) assets will be understated and expenses will be understated.

Answer 1

A

Question 2

A form used to organize and check data before preparing financial reports is known as a(n):

A) trial balance.
B) income statement.
C) ledger.
D) worksheet.

Answer 2

D

Question 3

Residual value is the:

A) estimated value of the asset when it is purchased.
B) estimated value of the asset at the end of its useful life.
C) cost of the asset.
D) same as book value.

Answer 3

B

Question 4

After the adjustment for depreciation has been made, the original cost of the equipment:

A) increases with a credit.
B) decreases with a debit.
C) remains the same.
D) is transferred to a liability.

Question 5

The cost of an asset less accumulated depreciation equals:

A) residual value.
B) original cost.
C) depreciation expense.
D) depreciable value.

Question 6

Bob purchased a truck for $53,000 with a residual value of $26,000 and a life expectancy of 5 years; using straight-line depreciation, the amount of the depreciation adjustment for the first year would be:

A) $10,600.
B) $5,400.
C) $5,200.
D) $5,300.

Question 7

If Prepaid Rent Expense for the period is NOT adjusted:

A) assets will be overstated and expenses will be overstated.
B) assets will be overstated and expenses will be understated.
C) assets will be understated and expenses will be overstated.
D) revenue will be understated and expenses will be understated.

Question 8

Bringing account balances up to date before preparing financial reports is called:

A) posting.
B) adjusting.
C) journalizing.
D) closing.

Question 9

When historical cost is used to record equipment, it would appear as the:

A) original cost in an asset account on the balance sheet.
B) residual value in the Stockholders Equity account.
C) residual value in an asset account on the balance sheet.
D) original cost on the income statement.

Question 10

NOT recording the Prepaid Rent Expense used causes:

A) assets to be too low.
B) liabilities to be too high.
C) expenses to be too low.
D) revenue to be too low.

Question 11

As Prepaid Rent Expense is used, the asset becomes a(n):

A) liability.
B) expense.
C) contra-asset.
D) contra-revenue.

Question 12

When original cost is used in the accounting records, the book value of the asset is:

A) the original cost.
B) the market value.
C) original cost less accumulated depreciation.
D) closed out.

Question 13

The adjustment to record supplies used during the period would be:

A) debit Supplies; credit Supplies Expense.
B) debit Supplies Expense; credit Cash.
C) debit Supplies Expense; credit Supplies.
D) debit Supplies; credit Cash.

Question 14

The adjustment that is made to allocate the cost of a building over its expected life is called:

A) depreciation expense.
B) residual value.
C) accumulated depreciation.
D) None of the above answers are correct.

Question 15

If the balance of supplies at the start of the month was $1,700 and at the end of the month you had $850 on hand, the adjustment for Supplies would be:

A) $850.
B) $950.
C) $750.
D) $1,700.

Question 16

Which of the following would be an example of a contra-asset?

A) Depreciation Expense
B) Unearned Revenue
C) Accumulated Depreciation
D) Discount on Bonds

Question 17

A contra-asset is:

A) a liability.
B) an asset with a debit balance.
C) an account with an opposite balance of a normal asset.
D) a revenue account.

Question 18

If the adjustment for Supplies used during the period was NOT made:

A) expenses would be too low.
B) assets would be too low.
C) expenses would be too high.
D) revenue would be too low.

Question 19

Prepaid Rent Expense is considered to be a(n):

A) liability.
B) asset.
C) contra-asset.
D) contra-revenue.

Question 20

An adjustment for Prepaid Rent Expense would indicate:

A) the amount originally paid.
B) the amount expired.
C) the amount of the ending balance.
D) the amount of the beginning balance.

Question 21

Larry's Snowboards estimated depreciation for office equipment at $750. The adjusting entry to record the depreciation would include:

A) a debit to Office Equipment for $750.
B) a credit to Depreciation Expense for $750.
C) a credit to Accumulated Depreciation for $750.
D) a credit to Office Equipment for $750.

Question 22

To record accrued salaries, you would:

A) debit Cash and credit Salaries Payable.
B) debit Salaries Payable and credit Salaries Expense.
C) debit Salaries Expense and credit Salaries Payable.
D) debit Salaries Expense and credit Cash.

Question 23

The estimated value of an item at the end of its useful life is:

A) depreciation expense.
B) residual value.
C) accumulated depreciation.
D) book value.

Question 24

Simpson Golf Academy estimated depreciation on its building at $1,300. The adjusting entry for depreciation of the building would include:

A) a debit to Building for $1,300.
B) a debit to Depreciation Expense for $1,300.
C) a credit to Building for $1,300.
D) a credit to Depreciation Expense for $1,300.

Question 25

Bailey's received its electric bill for December on December 31 but did not pay nor record it in the general journal. This resulted in:

A) understated assets.
B) overstated net income.
C) overstated liabilities.
D) understated net income.

Question 26

As accumulated depreciation is recorded, the net book value:

A) increases.
B) decreases.
C) remains the same.
D) equals zero.

Question 27

Equipment with a cost of $152,000 has an accumulated depreciation of $59,000. What is the historical cost of the equipment?

A) $152,000
B) $59,000
C) $211,000
D) $93,000

Question 28

Total wages per week are $4,000. You need to accrue $5,800 of wages. The adjusting entry would include which of the following?

A) Credit Wages Expense, $5,800; debit Wages Payable, $5,800
B) Debit Wages Expense, $5,800; credit Wages Payable, $5,800
C) Debit Wages Expense, $4,000; credit Wages Payable, $4,000
D) Debit Wages Expense, $4,000; credit Cash, $4,000

Question 29

Sally's Spices accrued and unpaid wages are $2,000. Which of the following is the required adjusting entry?

A) Debit Salaries Expense, $2,000; credit Salaries Payable, $2,000
B) Credit Salaries Expense, $2,000; debit Salaries Payable, $2,000
C) Debit Cash, $2,000; credit Salaries Expense, $2,000
D) Debit Salaries Payable, $2,000; credit Cash, $2,000

Question 30

Sam purchased a four-year insurance policy for $7,200. The adjusting entry for one month would include a:

A) debit to Insurance Expense, $150.
B) credit to Cash, $150.
C) debit to Prepaid Insurance, $150.
D) credit to Insurance expense, $150.

Question 31

On November 1, Duane paid $18,000 in advance for a year's rent. The November 30 adjusting entry for rent expense should include a:

A) debit Rent Expense, $18,000.
B) credit Prepaid Rent Expense, $18,000.
C) debit Rent Expense, $1,500.
D) credit Cash, $1,500.

Question 32

Equipment with a cost of $590,000 has an accumulated depreciation of $350,000. What is the book value of the equipment?

A) $306,250
B) $43,750
C) $240,000
D) $120,000

Question 33

Great Plains Modeling Agency purchased $1,700 of office furniture at the beginning of the month. Depreciation Expense at the end of the month is $200. What is the balance of the Office Furniture account at the end of the month?

A) $750
B) $1,900
C) $200
D) $1,700

Question 34

Alcatraz Boat Tours showed store supplies available during the year, $800. If at the end of the month supplies used were $100, the adjusting entry would include a:

A) debit to Supplies Expense for $100.
B) debit to Supplies Expense for $700.
C) credit to Supplies Expense for $100.
D) credit to Supplies Expense for $700.

Question 35

Online Service received its telephone bill for January, but is not going to pay the bill until February. What adjustment is needed to record the transaction?

A) Debit Telephone Expense; credit Cash
B) Debit Accounts Payable; credit Telephone Expense
C) Debit Telephone Expense; credit Accounts Payable
D) Debit Accounts Payable; credit Cash

Question 36

The adjusted trial balance on the worksheet shows Accumulated Depreciation, $2,000, and Depreciation Expense, $400. What was the balance in the Accumulated Depreciation account before the adjustment?

A) $2,400
B) $1,600
C) $400
D) $2,000

Question 37

The adjustment for wages earned, but not yet paid is:

A) Debit Wages Expense, credit Cash.
B) Debit Wages Payable, credit Wages Expense.
C) Debit Wages Payable, credit Cash.
D) Debit Wages Expense, credit Wages Payable.

Question 38

Unlimited Doors showed supplies available during the year of $2,300. A count of the supplies on hand as of October 31 is $1,200. The adjusting entry for Store Supplies would include:

A) a debit to Store Supplies Expense for $1,200.
B) a credit to Store Supplies Expense for $1,200.
C) a debit to Store Supplies for $1,100.
D) a debit to Store Supplies Expense for $1,100.

Question 39

Which of the following accounts would most likely NOT need to be adjusted at the end of the year?

A) Office Supplies
B) Salaries Payable
C) Accumulated Depreciation
D) Cash

Question 40

What type of account is Salaries Payable?

A) Asset
B) Contra-Asset
C) Liability
D) Revenue

Question 41

Adjusting the Supplies account will:

A) decrease the total assets and increase the total expenses.
B) decrease the total assets and decrease the total expenses.
C) increase the total assets and increase the total expenses.
D) increase the total assets and decrease the total expenses.

Question 42

The adjustment for accrued wages included the entire pay period, some of which occurs next month. This would:

A) understate the liabilities.
B) overstate the liabilities.
C) overstate net income.
D) None of these is correct.

Question 43

The depreciation of equipment will require an adjustment that results in:

A) total assets and total expenses increasing.
B) total assets increasing and total expenses decreasing.
C) total assets and revenue decreasing.
D) total assets decreasing and total expenses increasing.

Question 44

It's the end of the accounting period and no electric bill has been received (but the expense has been incurred); you should record an entry that:

A) increases the total revenue and increases the total expenses.
B) decreases the total assets and increases the total expenses.
C) increases the total liabilities and increases the total expenses.
D) decreases the total liabilities and increases the total expenses.

Question 45

Which of the following would cause a liability to be credited and an expense to be debited?

A) Recording the adjustment for the expiration of rent
B) Recording the depreciation of equipment
C) Recording the accrual of salaries incurred
D) Purchasing equipment

Question 46

Which of the following transactions would result in an accrual?

A) Salary expense has been incurred but unpaid.
B) Rent expired for the month.
C) Supplies used during the accounting period.
D) Owner's withdrawals.

Question 47

At the start of this year 18 months of rent was paid. At the year's end, how will this affect the balance sheet?

A) Assets will be decreased.
B) Liabilities will be increased.
C) Owner's Equity will be increased.
D) Net Income will be increased.

Question 48

Assuming no investments were made during the period, the balance of Capital shown on the worksheet is:

A) beginning capital.
B) ending capital.
C) net income.
D) equal to owner's withdrawals.

Question 49

Which of the following accounts would most likely be depreciated?

A) Equipment
B) Office Supplies
C) Investments
D) Prepaid Rent Expense

Question 50

Which of the following would cause a contra-asset to be credited and an expense debited?

A) Recording an accrued expense
B) Recording the consumption of supplies
C) Recording the building depreciation
D) All of the above would have that effect.

Question 51

Which of the following is most likely to result in an adjusting entry at the end of the period?

A) Payment of two months' insurance in advance
B) Payment of one month's rent
C) Owner's withdrawals
D) Owner's investment

Question 52

Depreciation of equipment was recorded twice this period. This would:

A) overstate expenses and overstate assets.
B) overstate expenses and understate assets.
C) understate expenses and overstate assets.
D) understate assets and understate assets.

Question 53

Which of the following would cause total assets to decrease and total expenses to increase?

A) Recording the depreciation of equipment
B) Recording the consumption of supplies
C) Recording the expiration of Prepaid Rent Expense
D) All of the above would have that effect.

Question 54

The entry to record the expiration of part of the Prepaid Rent Expense will:

A) decrease total liabilities and increase total expenses at the end of the month.
B) decrease total assets and decrease total expenses at the end of the month.
C) decrease total assets and increase total expenses at the end of the month.
D) increase total revenue and decrease total expenses at the end of the month.

Question 55

Adjusting entries affect:

A) the balance sheet.
B) the income statement.
C) the cash account.
D) Both A and B are correct.

Question 56

The accrual of an expense was not recorded. This would:

A) overstate assets and overstate liabilities.
B) overstate expenses and understate liabilities.
C) understate expenses and overstate liabilities.
D) understate expenses and understate liabilities.

Question 57

The adjustment for depreciation was credited to Equipment and debited to Depreciation Expense. This would:

A) overstate the assets.
B) understate the assets.
C) overstate net income.
D) None of these is correct.

Question 58

When making the adjustment for prepaid insurance, instead of writing off only the time that has passed, the entire policy was written off. This would:

A) overstate the assets.
B) overstate the liabilities.
C) understate net income.
D) understate expenses.

Question 59

Historical cost is the same as:

A) residual value.
B) original cost.
C) depreciable value.
D) salvage value.

Question 60

It is the year end, but not the pay period end. How will this affect the balance sheet?

A) Assets will be decreased.
B) Liabilities will be increased.
C) Owner's equity will be increased.
D) Net Income will be increased.

Question 61

If an adjustment to Supplies is not made, the balance in the Supplies account will be understated.

Question 62

The accounts added below the trial balance, on the worksheet, are always increasing.

Question 63

Revenue is recorded only after cash is received, and expenses are recorded only when incurred.

Question 64

Accumulated Depreciation is a Liability account.

Question 65

To compute net income or net loss, the debit and credit columns of the income statement section of the worksheet are totaled, and the difference is placed on the smaller side.

Question 66

The use of straight-line depreciation results in equal amounts of depreciation being taken over a period of time.

Question 67

Original cost of equipment is adjusted at the end of the accounting period.

Question 68

Prepaid Rent Expense is a contra-asset with a normal balance of a debit.

Question 69

An important function of the worksheet is for the accountant to find and correct errors before the financial statements are prepared.

Question 70

Depreciation Expense is debited when recording the depreciation for the period.

Question 71

The Sarbanes-Oxley Act:

A) requires a minimum cash balance.
B) does not allow adjusting entries.
C) states the need to have accurate financial reports.
D) does not allow the use of a worksheet.

Question 72

Rent expired at the end of an accounting period requires an adjustment.

Question 73

Accumulated Depreciation is a contra-asset account found on the income statement.

Question 74

The worksheet contains a Depreciation Schedule of Assets.

Question 75

The worksheet is a formal financial statement.

Question 76

When an asset expires or is used up, it becomes revenue.

Question 77

The original cost of equipment is reduced by the amount of Depreciation Expense.

Question 78

The amount of supplies used during the period would be shown in the adjustment columns of the worksheet.

Question 79

The spreading or allocating of the cost of a long-term asset is called discounting.

Question 80

Adjustments are necessary to update account balances for internal transactions.