Deck 12: Accruals, Deferrals, and the Worksheet

Question 1

The adjusting entry for uncollectible accounts requires a

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

Answer 1

D

Question 2

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

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

Answer 2

B

Question 3

Under the accrual basis of accounting, only income that has been earned is included in the revenue total on the income statement.

Answer 3

True

Question 4

Under a periodic inventory system, the Merchandise Inventory account is debited when goods are purchased for resale and credited when goods are sold and delivered to customers.

Question 5

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

Question 6

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

Question 7

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 8

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

Question 9

During the year, Spirit Fun had net credit sales of $800,000. Past experience shows that 1.5 percent of the firm's net credit sales will be uncollectible. Determine the adjusting entry needed to recognize the estimated expense for these uncollectible accounts.

A)debit Uncollectible Accounts Expense $12,000 and credit Accounts Receivable $12,000.
B)debit Uncollectible Accounts Expense $12,000 and credit Allowance for Doubtful Accounts
$12,000.
C)debit Uncollectible Accounts Expense $120,000 and credit Allowance for Doubtful Accounts
$120,000.
D)debit Allowance for Doubtful Accounts $12,000 and credit Accounts Receivable $12,000.

Question 10

On June 1, 2019, Mighty Fast Flooring issued a 10-month, 9 percent note for $5,000. 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 $450.00 and a credit to Interest Payable for $450.00.
B)a debit to Interest Expense for $262.50 and a credit to Interest Payable for $262.50.
C)a debit to Interest Income for $450.00 and a credit to Interest Receivable for $450.00.
D)a debit to Interest Expense for $262.50 and a credit to Notes Payable-Trade for $262.50.

Question 11

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 12

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

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

Question 13

Which of the following statements is not correct?

A)The cost less the salvage value equals the depreciable base of a long-term asset.
B)Each adjustment for an accrued expense includes a credit to a liability account.
C)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.
D)Uncollectible Accounts Expense is a contra asset account.

Question 14

Identify the statement below that is true regarding the Allowance for Doubtful Accounts account.

A)The account has a normal credit balance and is reported on the income statement.
B)The account has a normal debit balance and is reported on the income statement.
C)The account has a normal credit balance and is reported on the balance sheet.
D)The account has a normal debit balance and is reported on the balance sheet.

Question 15

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

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

Question 16

Allowance for Doubtful Accounts is

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

Question 17

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.

Question 18

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

Question 19

Under a periodic inventory system, to remove the beginning inventory from the books, the Income Summary account is credited for the amount of the beginning inventory.

Question 20

The journal entry to record interest that has been earned but not yet received includes a debit to Interest Receivable and a credit to Interest Income.

Question 21

If an account has a debit balance of $2,000 in the Trial Balance section of a worksheet and there is a credit of $600 in the Adjustments section, the account balance in the Adjusted Trial Balance section of the worksheet is a

A)$1,400 debit.
B)$1,400 credit.
C)$600 credit.
D)$2,600 debit.

Question 22

On August 1, 2019, 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, 2019, is

A)$1,800.
B)$300.
C)$3,600.
D)$1,500.

Question 23

Accrued expenses are

A)used in one period but not paid for until a later period.
B)paid for in one period but not fully used 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 24

On November 1, 2019, a firm accepted a 5-month, 10 percent note for $1,200 from a customer with an overdue balance. The accrued interest recorded for this note for the year ended December 31, 2019, is

A)$60.
B)$120.
C)$10.
D)$20.

Question 25

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, if debits exceed credits in the Adjusted Trial Balance section, the difference represents a net loss.
C)On the worksheet, the totals of the Income Statement columns should equal the totals of the Balance Sheet columns.
D)All of these statements are correct.

Question 26

On January 2, 2019, a firm purchased equipment for $10,000. Depreciation expense for the year ending December 31, 2019, given the straight-line method, a 5-year useful life, and a salvage value of $1,200, is

A)$1,800.
B)$2,000.
C)$1,760.
D)$1,400.

Question 27

On December 1, 2019, a firm accepted a 6-month, 12 percent note for $10,000 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 $100 and a credit to Interest Income for $100.
B)a debit to Interest Receivable for $600 and a credit to Interest Income for $600.
C)a debit to Interest Income for $100 and a credit to Interest Receivable for $100.
D)a debit to Interest Receivable for $1,200 and a credit to Interest Income for $1,200.

Question 28

On June 1, 2019, a firm purchased a 1-year insurance policy for $2,400 and paid the full premium in advance. The insurance expense associated with this policy for the year ending December 31, 2019, is

A)$1,000.
B)$200.
C)$1,400.
D)$2,400.

Question 29

On April 1, 2019, a firm accepted a 6-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 June 30, 2019, is

A)$180.
B)$90.
C)$15.
D)$45.

Question 30

Allowance for Doubtful Accounts is reported in the

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

Question 31

If an account has a debit balance of $1,600 in the Trial Balance section of a worksheet and there is a debit of $300 in the Adjustments section, the account balance in the Adjusted Trial Balance section of the worksheet is a

A)$1,900 debit.
B)$1,300 credit.
C)$1,900 credit.
D)$1,300 debit.

Question 32

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

A)paid for by the customer and recorded in one period but not fully earned until a later period.
B)earned, recorded and paid for by the customer in one period.
C)budgeted, paid for, and partially earned 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 33

Accrued income is income that has been
A)budgeted for the fiscal period.

A)received but not earned.
B)earned but not received.
D)earned and received.

Question 34

If an account has a credit balance of $2,200 in the Trial Balance section of a worksheet and there is a credit of $400 in the Adjustments section, the account balance in the Adjusted Trial Balance section of the worksheet is

A)$1,800 debit.
B)$2,600 debit.
C)$2,600 credit.
D)$1,800 credit.

Question 35

Which of the following statements is correct?

A)Income that has been earned but not yet received is called accrued income.
B)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.
C)Unearned Subscription Income is a liability account.
D)All of these statements are correct.

Question 36

On Oct 1, 2019, a firm purchased a 1-year insurance policy for $2,400 and paid the full premium in advance. The adjustment needed on December 31, 2019, to report the amount of insurance that had expired, would be:

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

Question 37

With the accrual basis of accounting, revenue from a credit sale is recognized

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

Question 38

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

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

Question 39

On January 1, 2019, a firm purchased machinery for $19,000. Depreciation expense for the year ending December 31, 2019, given the straight-line method, a 8-year useful life, and a salvage value of $2,000, is

A)$2,125.
B)$2,000.
C)$2,400.
D)$2,375.

Question 40

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

Question 41

After the two adjusting entries for merchandise inventory for Marley Motorcycles have been entered on the worksheet, the Income Summary account in the Adjusted Trial Balance section has a debit of $65,000 and a credit of $73,000. The amount of merchandise inventory at the end of the year is:

A)$8,000.
B)$73,000.
C)$65,000.
D)$138,000.

Question 42

Stan Still Stationery Store's employees are paid every Friday for a five day work week and are paid a total of $1,625 per day. If December 31, 2019, is on a Tuesday, the amount of the adjusting entry for accrued wages is:

A)$4,875
B)$3,250
C)$8,125
D)$1,625

Question 43

Hugh Morris Company pays weekly wages of $15,000 every Friday for a five day week ending on that day. If the last day of the year is on Tuesday, the adjusting entry to record the accrued wages is:

A)debit Wages Expense $15,000; credit Cash $15,000
B)debit Wages Expense $9,000; credit Wages Payable $9,000
C)debit Wages Expense $6,000; credit Drawing $6,000
D)debit Wages Expense $6,000; credit Wages Payable $6,000

Question 44

Rose Bush Nursery purchased a delivery truck for $40,000. The truck is expected to have a useful life of 5 years and a residual value of $2,800. The company uses the straight-line method of depreciation. If the truck was purchased on June 1, 2019, what is the amount of depreciation expense for the truck for the year ended December 31, 2019?

A)$2,800
B)$4,340
C)$7,440
D)$3,100

Question 45

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 record the new merchandise inventory balance assuming the company uses the periodic inventory system would be:

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

Question 46

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)$1,500 debit.
D)$1,000 debit.

Question 47

The trial balance of Premier Lighting Co. shows Merchandise Inventory of $35,000. The company uses the periodic inventory system. 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 Purchases of $35,000 and a credit to Merchandise Inventory for $35,000.
B)a debit to Income Summary of $35,000 and a credit to Merchandise Inventory for $35,000.
C)a debit to Income Summary of $28,000 and a credit to Merchandise Inventory for $28,000.
D)a debit to Merchandise Inventory of $28,000 and a credit to Income Summary for $28,000.

Question 48

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

Question 49

Abe & Anna Split Ice Cream Parlor paid $3,000 cash for a 6-month advertising contract on September 30, 2019. The amount of advertising expense reported on the Income Statement for the year ending December 31, 2019, for this advertising contract is

A)$3,000.
B)$1,500.
C)$500.
D)$2,000.

Question 50

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

Question 51

Millie's Bakery employees earn $4,500 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 Salaries Payable for $900 and a credit to Salaries Expense for $900.
B)a debit to Salaries Expense for $2,700 and a credit to Salaries Payable for $2,700.
C)a debit to Income Summary for $2,700 and a credit to Salaries Payable for $2,700.
D)a debit to Salaries Expense for $4,500 and a credit to Salaries Payable for $4,500.

Question 52

Depreciation Expense has a debit balance in the Trial Balance section of the worksheet of $2,200 and a debit of $200 in the adjustments section of the worksheet, the balance of Depreciation Expense in the Adjusted Trial Balance section of the worksheet is a

A)$200 debit.
B)$2,400 credit.
C)$2,000 debit.
D)$2,400 debit.

Question 53

On October 1, 2019, Paige Turner Publishing received $5,400 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, 2019, is

A)Debit Unearned Subscriptions $1,350; credit Subscriptions Income $1,350.
B)Debit Unearned Subscriptions $450; credit Subscriptions Income $450.
C)Debit Unearned Subscriptions $5,400; credit Subscriptions Income $5,400.
D)Debit Subscriptions Income $1,350; credit Unearned Subscriptions $1,350.

Question 54

Unearned Revenue has a credit balance in the Trial Balance section of the worksheet of $8,300 and a debit of $600 in the adjustments section of the worksheet, the balance of Unearned Revenue in the Adjusted Trial Balance section of the worksheet is a

A)$600 debit.
B)$7,700 credit.
C)$8,900 credit.
D)$7,700 debit.

Question 55

The ending merchandise inventory is recorded on the worksheet in the

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

Question 56

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

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

Question 57

Rose Bush Nursery purchased a delivery truck for $40,000. The truck is expected to have a useful life of 5 years and a residual value of $2,800. The company uses the straight-line method of depreciation. If the truck was purchased on June 1, 2019, what is the amount of depreciation expense for the truck for one full year?

A)$3,100
B)$4,340
C)$2,800
D)$7,440

Question 58

Accumulated Depreciation has a credit balance in the Trial Balance section of the worksheet of
$15,600 and a credit of $3,900 in the adjustments section of the worksheet, the balance of Accumulated Depreciation in the Adjusted Trial Balance section of the worksheet is a

A)$19,500 debit.
B)$15,600 credit.
C)$11,700 credit.
D)$19,500 credit.

Question 59

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 company uses a periodic inventory system. The adjusting entry to record the new merchandise inventory balance would be:

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

Question 60

On September 1, 2019, a firm accepted a 6-month, 8% note for $12,000 from a customer with an overdue account balance. The accrued interest recorded for this note on December 31, 2019, is

A)$960.00.
B)No accrual is necessary.
C)$320.00.
D)$240.00.

Question 61

Determine the account and amount to be debited and the account and amount to be credited for the following adjustment. On December 31, 2019, the firm owed wages totaling $4,300.

Question 62

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

Question 63

Determine the account and amount to be debited and the account and amount to be credited for the following adjustment. Equipment purchased for $65,000 on January 3, 2019, has an estimated life of 6 years and an estimated salvage value of $3,800. The firm uses the straight-line method of depreciation. Determine the adjustment for the month ended January 31, 2019.

Question 64

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 $560,000. Past experience shows that 1.4 percent of the firm's net credit sales result in uncollectible accounts.

Question 65

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 $890,000. Past experience shows that 0.5 percent of the firm's net credit sales result in uncollectible accounts.

Question 66

To determine the amount of the annual depreciation, the depreciable base is divided by the number of years in the asset's________ .

Question 67

If an account has a debit balance in the Trial Balance section and a debit entry in the Adjustments section, the two amounts should be ________ to compute the adjusted trial balance total.

Question 68

After the two adjusting entries for merchandise inventory for Marley Motorcycles have been entered on the worksheet, the Income Summary account in the Adjusted Trial Balance section has a debit of $65,000 and a credit of $73,000. The amount of merchandise inventory at the beginning of the year is:

A)$8,000.
B)$65,000.
C)$73,000.
D)$138,000.

Question 69

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

Question 70

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

Question 71

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

Question 72

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, 2019, 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, 2019.

Question 73

Property, plant, and equipment are long-term assets that require end-of-period adjustments for________.

Question 74

Under a periodic inventory system, the beginning merchandise inventory is removed from the books with a credit to the Merchandise Inventory account and a debit to the ________ account.

Question 75

Under the periodic inventory system, the journal entry to record the ending merchandise inventory in the books includes a ________ to the Merchandise Inventory account.

Question 76

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

Question 77

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

Question 78

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

Question 79

Under a periodic inventory system, the adjustment for merchandise inventory is made in ________ steps.

Question 80

Uncollectible Accounts Expense is a(n)________ account.