Deck 12: Accruals, Deferrals, and the Worksheet

Question 1

Accrued expenses represent expense items that have been paid for and used in the current period.

Answer 1

False

Question 2

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

Answer 2

False

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

Income that is received before it is earned is called unearned, or deferred, income.

Question 5

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

Question 6

The adjustment for merchandise inventory is made in ____________________ steps.

Question 7

When a count is made of the goods on hand at the end of the period, the quantity of each type of goods in stock is listed on a form called a(n) ____________________.

Question 8

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

Question 9

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 10

The one account that appears on both the statement of owner's equity and the balance sheet is the ____________________ account.

Question 11

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

Question 12

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

Question 13

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 14

Adjustments for accrued income always involve a credit to a revenue account.

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 adjusting entry to allocate the cost of equipment to operations includes a debit to Accumulated Depreciation--Equipment and a credit to Depreciation Expense--Equipment.

Question 17

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 18

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 19

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

Question 20

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

Question 21

Expense items that relate to the current period but have not yet been paid for or recorded are called ____________________ expenses.

Question 22

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

Question 23

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 24

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

Question 25

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 26

Uncollectible Accounts Expense is a(n) ____________________ account.

Question 27

On January 2, 2014, a firm purchased equipment for $8,500. Depreciation expense for the year ending December 31, 2014, 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 28

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

Question 29

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 30

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

Question 31

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

Question 32

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 33

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

Question 34

When an adjusting entry is made for supplies used, an expense account is increased and a(n) ____________________ account is decreased.

Question 35

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 36

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 37

On May 1, 2014, 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, 2014, is

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

Question 38

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

Question 39

Purchases of merchandise are

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

Question 40

On July 1, 2013, 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, 2013, is

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

Question 41

On April 1, 2013, 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, 2013, is

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

Question 42

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 43

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 the above statements are correct.

Question 44

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 45

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 46

Robin Banks, Inc. owns an armored truck which was purchased for $80,000. The Accumulated Depreci?ation 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 47

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 48

On November 1, 2013, 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, 2013, is

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

Question 49

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 50

On November 1, 2013, 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, 2013, 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

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 52

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 53

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 54

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 55

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 56

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 57

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 58

On January 1, 2014, a firm purchased machinery for $17,000. Depreciation expense for the year ending December 31, 2014, 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 59

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 the above statements are correct.

Question 60

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 61

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, 2013, 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 62

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 63

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, 2013, what is the amount of depreciation expense for the truck for the year ended December 31, 2013?

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

Question 64

Determine the account and amount to be debited and the account and amount to be credited for the following adjustment. On October 1, 2013, the firm paid a premium of $5,600 in cash for a 1-year insurance policy. On December 31, 2013, coverage for a period of three months had expired.

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 $490,000. Past experience shows that 1.2 percent of the firm's net credit sales result in uncollectible accounts.

Question 66

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 67

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 68

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, 2014, 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, 2014.

Question 69

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, 2013, for this advertising contract is

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

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, 2013, the firm owed wages totaling $4,300.

Question 71

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, 2010, an inventory of supplies showed that items costing $500 were on hand.

Question 72

Determine the account and amount to be debited and the account and amount to be credited for the following adjustment. On October 1, 2013, the firm paid a premium of $2,800 in cash for a 1-year insurance policy. On December 31, 2013, coverage for a period of three months had expired.

Question 73

Determine the account and amount to be debited and the account and amount to be credited for the following adjustment. On December 31, 2013, the firm owed wages totaling $3,900.

Question 74

Determine the account and amount to be debited and the account and amount to be credited for the following adjustment. On December 31, 2013, the Notes Payable account had a balance of $12,000. This represented a 3-month, 9 percent note issued on December 1, 2013.

Question 75

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 76

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, 2013, 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, 2013.

Question 77

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, 2013, an inventory of supplies showed that items costing $550 were on hand.

Question 78

On October 1, 2013, 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, 2013, is

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

Question 79

Determine the account and amount to be debited and the account and amount to be credited for the following adjustment. On December 31, 2013, the Notes Payable account had a balance of $6,000. This represented a 3-month, 9 percent note issued on December 1, 2013.

Question 80

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.