Deck 5: Adjustments and the Worksheet

Question 1

If adjustments are entered on a worksheet, it is not necessary to record them in the journal or the ledger.

Answer 1

False

Question 2

A(n) ____________________ is a comparison of the general ledger accounts with debit balances to the general ledger accounts with credit balances to make sure that the debit and credit totals are equal.

Answer 2

trial balance

Question 3

The process of allocating the cost of a long-term asset as an expense of operations during the asset's expected useful life is known as ____________________.

Answer 3

depreciation

Question 4

Prepaid expenses, such as prepaid rent and prepaid insurance, represent assets for a business until they are used.

Question 5

The statement of owner's equity is prepared from the data in the Income Statement section of the worksheet.

Question 6

The process of updating accounts at the end of an accounting period for previously unrecorded items that belong to the period is referred to as making ____________________.

Question 7

The balance of the owner's drawing account is extended to the Income Statement Debit column of the worksheet.

Question 8

In the Adjusted Trial Balance section of the worksheet the total debits should equal the total credits.

Question 9

If an adjustment is not recorded for supplies used, the firm's assets will be overstated.

Question 10

Land is a long-term asset that is not subject to depreciation.

Question 11

The cost of a long-term asset, such as equipment, is transferred to expense as it is used during its life.

Question 12

The normal balance of a contra asset account is a debit.

Question 13

All changes in account balances are caused by transactions between the business and another business or individual.

Question 14

The difference between the debit balance of the Equipment account and the credit balance of the Accumulated Depreciation-Equipment account is called the ____________________ of an asset.

Question 15

If an adjustment for expired rent is not recorded, the firm's expenses will be overstated.

Question 16

The Supplies account had a balance of $1,200 when a physical count indicated that supplies on hand totaled $400. This means that supplies in the amount of ____________________ were used during the accounting period.

Question 17

The balance of a liability account is extended to the Balance Sheet Credit column of the worksheet.

Question 18

Preparation of a worksheet eliminates the necessity of preparing an income statement and a balance sheet.

Question 19

The balances of the revenue accounts are recorded in the Trial Balance Credit column, the Adjusted Trial Balance Credit column, and the Balance Sheet Credit column of the worksheet.

Question 20

Letters are used to label the debit and credit parts of an adjustment on the worksheet.

Question 21

On a worksheet, the adjusting entry to account for depreciation of equipment consists of

A) a debit to Depreciation Expense and a credit to Equipment.
B) a debit to Depreciation Expense and a credit to Accumulated Depreciation.
C) a debit to Equipment and a credit to Accumulated Depreciation.
D) a debit to Accumulated Depreciation and a credit to Equipment.

Question 22

Expense items that are acquired and paid for in advance of their use are called ____________________ expenses.

Question 23

Adjusting Entries are

A) corrections of errors.
B) needed for expenses that were paid for before or after they were used.
C) not required.
D) will always affect cash.

Question 24

A(n) ____________________ is prepared at the end of each accounting period to organize and summarize the data needed for the preparation of the financial statements.

Question 25

Equipment cost $36,000 and is expected to be useful for 5 years and have no salvage value. Under the straight-line method, monthly depreciation will be

A) $600.
B) $720.
C) $60.
D) $12.

Question 26

An accumulated depreciation account has a normal ____________________ balance.

Question 27

Equipment costing $13,500 with an estimated salvage value of $1,020 and an estimated life of 4 years was purchased on November 1, 2013. Using the straight-line depreciation method, what is the amount of depreciation expense to be recorded at December 31, 2013?

A) $260
B) $520
C) $3,120
D) $1,020

Question 28

On a worksheet, the adjusted balance of Depreciation Expense is extended from the Adjusted Trial Balance Debit column to the ____________________ Debit column.

Question 29

A total of $3,200 in supplies was purchased during the year. At the end of the year $700 of the supplies were left. The adjusting entry needed at the end of the year is:

A) debit Supplies $2,500; credit Supplies Expense $2,500
B) debit Supplies Expense $3,200; credit Supplies $3,200
C) debit Supplies Expense $700; credit Supplies $700
D) debit Supplies Expense $2,500; credit Supplies $2,500

Question 30

On a worksheet, the adjusted balance of Supplies is extended from the Adjusted Trial Balance Debit column to the ____________________ Debit column.

Question 31

If equipment has ____________________ value, it can be sold for additional use or for scrap.

Question 32

The account credited in the adjusting entry made to record the expiration of a portion of prepaid rent is the ____________________ account.

Question 33

On October 1, 2013, Jay Walker Company purchased a one-year insurance policy for $660. The correct adjusting entry on December 31, 2013, is

A) debit Insurance Expense $660; credit Prepaid Insurance $660
B) debit Insurance Expense $495; credit Prepaid Insurance $495
C) debit Prepaid Insurance $55; credit Insurance Expense $55
D) debit Insurance Expense $165; credit Prepaid Insurance $165

Question 34

When the liabilities and owner's equity section is listed under the assets section, the firm is using the ____________________ form balance sheet.

Question 35

Which of the following need not be completed separately if a worksheet is prepared?

A) a trial balance
B) an income statement
C) a balance sheet
D) a statement of owner's equity

Question 36

MacGyver Company bought equipment on January 3, 2013, for $34,000. At the time of purchase, the equipment was estimated to have a useful life of six years and a salvage value of $880. Using the straight-line method, the amount of one year's depreciation is

A) $880
B) $5,520
C) $460
D) $5,667

Question 37

When the ____________________ method of depreciation is used, an equal amount of depreciation is charged to each accounting period during the asset's useful life.

Question 38

Which of the following entries records the depreciation on equipment for the fiscal year-end adjustment?

A) Debit Accumulated Depreciation; credit Depreciation Expense
B) Debit Depreciation Expense; credit Equipment
C) Debit Depreciation Expense; credit Accumulated Depreciation
D) Debit Depreciation; credit Depreciation Expense

Question 39

An accumulated depreciation account is often referred to as a(n) ____________________ asset account.

Question 40

When a trial balance is in balance,

A) adjusting entries are not required.
B) the general ledger is free of errors.
C) the debit account balances equal the credit account balances.
D) the company has earned a net income.

Question 41

If the prepaid expenses are not adjusted, assets on the balance sheet

A) will be overstated.
B) will be understated.
C) will not be affected.
D) may be either overstated or understated.

Question 42

On a worksheet, the adjusted balance of the Accumulated Depreciation account is extended to:

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

Question 43

On a worksheet, the adjusted balance of the Supplies Expense account is extended to:

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

Question 44

On the worksheet, the Balance Sheet columns should balance

A) before the net income amount is added to the Balance Sheet Debit column.
B) after the net income amount is added to the Balance Sheet Debit column.
C) after the net income amount is added to the Balance Sheet Credit column.
D) before the net income amount is added to the Balance Sheet Credit column.

Question 45

Which of the following statements is correct?

A) The cost of supplies used is reported on the statement of owner's equity.
B) The cost of supplies used represents an operating expense of the business.
C) Accumulated Depreciation--Equipment is presented in the Liabilities section of a balance sheet.
D) At the time of their acquisition, prepaid expenses are recorded in expense accounts.

Question 46

On a worksheet, a net loss is

A) recorded in the Income Statement Debit column.
B) recorded in the Balance Sheet Debit column.
C) recorded in the Balance Sheet Credit column.
D) not recorded.

Question 47

The adjusting entry to account for the use of supplies consists of

A) a debit to Supplies Expense and a credit to Supplies.
B) a debit to Supplies and a credit to Supplies Expense.
C) a debit to Supplies and a credit to Accumulated Depreciation.
D) a debit to Accumulated Depreciation and a credit to Supplies.

Question 48

On a worksheet, the adjusted balance of the Depreciation Expense account is extended to:

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

Question 49

The adjusting entry to account for the expiration of prepaid advertising consists of

A) a debit to Prepaid Advertising and a credit to Advertising Expense.
B) a debit to Advertising Expense and a credit to Accumulated Depreciation.
C) a debit to Prepaid Advertising and a credit to Accumulated Depreciation.
D) a debit to Advertising Expense and a credit to Prepaid Advertising.

Question 50

If a worksheet is prepared at the end of the accounting year,

A) preparation of the financial statements is not required.
B) the adjusting entries do not need to be journalized.
C) only a balance sheet is required.
D) the financial statements are prepared using the worksheet data.

Question 51

On a worksheet, the adjusted balance of the revenue account Fees Income would be extended to:

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

Question 52

On a worksheet, the adjusted balance of a contra asset account would be extended to

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

Question 53

On a worksheet, the adjusted balance of the Supplies account is extended to:

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

Question 54

On a worksheet, the adjusted balance of the Prepaid Rent account is extended to the:

A) Income Statement Debit column.
B) Income Statement Credit column.
C) Balance Sheet Debit column.
D) Balance Sheet Credit column.

Question 55

Which of the following statements is not correct?

A) The difference between the total of the Income Statement Debit column and the total of the Income Statement Credit column of the worksheet represents either net income or net loss.
B) Net income is recorded on the worksheet in the Income Statement Debit column and the Balance Sheet Credit column.
C) Only the balances of accounts that are affected by adjustments must be recalculated before they are recorded in the Adjusted Trial Balance section of the worksheet.
D) If an account has a debit balance in the Trial Balance section of the worksheet and there is a credit entry in the Adjustments section, the credit amount is added when computing the balance to be shown in the Adjusted Trial Balance section of the worksheet.

Question 56

If long-term assets are not adjusted, expenses on the income statement

A) will be overstated.
B) will be understated.
C) will not be affected.
D) may be either overstated or understated.

Question 57

On a balance sheet, Accumulated Depreciation-Equipment is reported

A) as a deduction from the cost of the equipment.
B) as a liability.
C) as an expense.
D) as a deduction from the total of the assets.

Question 58

The adjusting entry to account for the expiration of prepaid insurance consists of

A) a debit to Insurance Expense and a credit to Prepaid Insurance.
B) a debit to Insurance Expense and a credit to Accumulated Depreciation.
C) a debit to Prepaid Insurance and a credit to Accumulated Depreciation.
D) a debit to Accumulated Depreciation and a credit to Prepaid Insurance.

Question 59

On November 25, 2013, the company paid $24,000 rent in advance for a six-month period (December 2013 through May 2014). On December 31, 2013, the adjustment for expired rent would include

A) a $4,000 debit to Prepaid Rent.
B) a $4,000 credit to Rent Expense.
C) a $24,000 debit to Rent Expense.
D) a $4,000 credit to Prepaid Rent.

Question 60

Which of the following statements is not correct?

A) Generally accepted accounting principles require that the original cost of a long-term asset continue to appear in the asset account until the disposition of the asset.
B) The book value of a long-term asset is reduced each year as depreciation is recorded.
C) Buildings and trucks are examples of long-term assets.
D) Salvage value is computed by subtracting the accumulated depreciation from the cost of a long-term asset.

Question 61

The balance in the account Accumulated Depreciation, Equipment will

A) be reported on the Income Statement.
B) be reported on the Statement of Owner's Equity.
C) will be reported on the Balance Sheet.
D) not appear on any financial statement.

Question 62

The balances of the ledger accounts for Oleman Services on January 31, 2013, and the information needed for adjustments are shown below. Prepare the Trial Balance section, record the adjustments, and complete the worksheet. Adjustment information:
(a) The supplies were purchased on January 1, 2013. An inventory of supplies showed $600 on hand on January 31, 2013.
(b) The amount of Prepaid Insurance represents a payment made January 1, 2013, for a six-month insurance policy.
(c) The equipment, purchased January 1, 2013, has an estimated useful life of 5 years with no salvage value. The firm uses the straight-line method of depreciation.

Question 63

For each of the accounts listed below, enter the words, Increase or Decrease, in the Debit and Credit columns to indicate the effects of each on the account balance.

Question 64

The book value of long-term assets is reported on

A) the income statement.
B) the statement of owner's equity.
C) the balance sheet.
D) the worksheet.

Question 65

For each of the accounts listed below, enter the words, Increase or Decrease, in the Debit and Credit columns to indicate the effects of each on the account balance.

Question 66

Read the description of following adjustments that are required at the end of the accounting period for Anise's Repair Services. Record the necessary adjusting entries on page 2 of a general journal. Omit the descriptions.
A. Prepaid rent for the year on January 1, 2013. Rent expired during the month of January 2013, $1,600.
B. Purchased supplies for $4,000 on January 1, 2013. Inventory of supplies was $1,200 on January 30, 2013.
C. Depreciation is computed using the straight-line method. Equipment purchased on January 1, 2013, for $3,000 has an estimated useful life of 5 years with no salvage value.
D. Signed a 3-month contract for $450 of prepaid advertising on January 1, 2013.

Question 67

Read the description of following adjustments that are required at the end of the accounting period for Hubbard Repair Services. Determine the account and amount to be debited and the account and amount to be credited.
A. Prepaid rent for the year on April 1, 2013. Rent expired during the month of April 2013, $3,500. Record the adjustment on April 30, 2013.
B. Purchased supplies for $2,000 on April 1, 2013. Inventory of supplies was $1,600 on April 30, 2013. Record the adjustment for the amount of the supplies that were used during the month of April 2013.
C. Depreciation is computed using the straight-line method. Equipment purchased on April 1, 2013, for $18,000 has an estimated useful life of 5 years with no salvage value. Record the adjustment on April 30, 2013.
D. Signed a 6-month contract for $2,400 of prepaid advertising on April 1, 2013. Record the adjustment for the amount of the contract that expired during the month of April 2013.

Question 68

Accumulated Depreciation, Equipment, is shown as:

A) a liability on the Balance Sheet
B) a reduction of Capital on the Statement of Owner's Equity
C) a contra asset on the Balance Sheet
D) an expense on the Income Statement

Question 69

Read each of the following transactions for Patel's Repair Services. Determine the accounts to be debited and credited in the necessary end-of-May adjustments.
A. On May 1, 2013, Patel's Repair Services, a new firm, paid $6,600 rent in advance for a six-month period. The $6,600 was debited to the Prepaid Rent account.
B. On May 1, 2013, the firm bought supplies for $2,000. The $2,000 was debited to the Supplies account. An inventory of supplies at the end of May showed that supplies costing $800 were on hand.
C. On May 1, 2013, the firm bought equipment costing $10,000. The equipment has an expected useful life of 10 years and no salvage value. The firm will use the straight-line method of depreciation.

Question 70

Read the description of following adjustments that are required at the end of the accounting period for Riley Furniture Restoration. Determine the account and amount to be debited and the account and amount to be credited.
A. Purchased supplies for $1,000 on June 1, 2013. Inventory of supplies was $300 on June 30, 2013. Record the adjustment for the amount of the supplies that were used during the month of June 2013.
B. Signed a 4-month contract for $1,200 of prepaid advertising on June 1, 2013. Record the adjustment for the amount of the advertising contract that expired during the month of June 2013.
C. Prepaid rent for the year on June 1, 2013. Rent expired during the month of June 2013, $700. Record the adjustment on June 30, 2013.
D. Depreciation is computed using the straight-line method. Equipment purchased on June 1, 2013, for $16,800 has an estimated useful life of 5 years with no salvage value. Record the adjustment on June 30, 2013.

Question 71

Read the description of following adjustments that are required at the end of the accounting period for River Front Repair. Record the necessary adjusting entries on page 2 of a general journal. Omit the descriptions.
A. Prepaid rent for the year on January 1, 2013. Rent expired during the month of January, $7,200.
B. Equipment purchased on January 1, 2013, for $8,100 has an estimated useful life of 5 years with no salvage value. Depreciation is computed using the straight-line method.
C. Purchased supplies for $650 on January 1, 2013. Inventory of supplies was $100 on January 31, 2013.
D. Signed a 12-month contract for $4,800 of prepaid advertising on January 1, 2013.

Question 72

Read the description of following adjustments that are required at the end of the accounting period for Hubbard Repair Services. Determine the account and amount to be debited and the account and amount to be credited.
A. Purchased supplies for $2,000 on November 1, 2013. Inventory of supplies was $600 on November 30, 2013. Record the adjustment for the amount of the supplies that were used during the month of November 2013.
B. Signed a 4-month contract for $2,400 of prepaid advertising on November 1, 2013. Record the adjustment for the amount of the advertising contract that expired during the month of November 2013.
C. Prepaid rent for the year on November 1, 2013. Rent expired during the month of November 2013, $1,500. Record the adjustment on November 30, 2013.
D. Depreciation is computed using the straight-line method. Equipment purchased on November 1, 2013, for $6,000 has an estimated useful life of 5 years with no salvage value. Record the adjustment on November 30, 2013.

Question 73

The adjustments made on the worksheet

A) are posted to the ledger but are not recorded in the journal.
B) are recorded in the journal but are not posted to the ledger.
C) need not be entered in the journal or the ledger.
D) are recorded in the journal and then posted to the general ledger accounts.

Question 74

Read each of the following transactions for Enterprises Security Systems. Determine the accounts and amounts to be debited and credited in the necessary end-of-July adjustments.
A. On July 1, 2013, Enterprises Security Systems, a new firm, bought supplies for $2,300. The $2,300 was debited to the Supplies account. An inventory of supplies at the end of June showed that supplies costing $900 were on hand.
B. On July 1, 2013, the firm bought equipment costing $24,000. The equipment has an expected useful life of 10 years and no salvage value. The firm will use the straight-line method of depreciation.
C. On July 1, 2013, the firm paid $4,500 rent in advance for a nine-month period. The $4,500 was debited to the Prepaid Rent account.

Question 75

A consecutive, twelve-month accounting period is called a(n)

A) accrual year
B) fiscal year
C) accounting year
D) adjusted year

Question 76

Read the description of following adjustments that are required at the end of the accounting period for Drake Consulting Services. Determine the account and amount to be debited and the account and amount to be credited.
A. Prepaid rent for the year on January 1, 2013. Rent expired during the month of January 2013, $7,000. Record the adjustment on January 31, 2013.
B. Purchased supplies for $1,600 on January 1, 2013. Inventory of supplies was $600 on January 30, 2013. Record the adjustment for the amount of the supplies that were used during the month of January 2013.
C. Depreciation is computed using the straight-line method. Equipment purchased on January 1, 2013, for $36,000 has an estimated useful life of 5 years with no salvage value. Record the adjustment on January 31, 2013.
D. Signed a 12-month contract for $2,400 of prepaid advertising on January 1, 2013. Record the adjustment for the amount of the advertising contract that expired during the month of January 2013.

Question 77

Read the description of following adjustments that are required at the end of the accounting period for AAA Appliance Repair Services. Record the necessary adjusting entries on page 2 of a general journal. Omit the descriptions.
A. Prepaid rent for the year on January 1, 2013. Rent expired during the month of January 2013, $2,000.
B. Purchased supplies for $7,600 on January 1, 2013. Inventory of supplies was $1,600 on January 30, 2013.
C. Depreciation is computed using the straight-line method. Equipment purchased on January 1, 2013, for $15,000 has an estimated useful life of 5 years with no salvage value.
D. Signed a 3-month contract for $600 of prepaid advertising on January 1, 2013.

Question 78

Read each of the following transactions for Pickerton Printer Repair Services. Determine the accounts to be debited and credited in the necessary end-of-April adjustments.
A. On April 1, 2013, Pickerton Printer Repair Services, a new firm, bought supplies for $2,500. The $2,500 was debited to the Supplies account. An inventory of supplies at the end of June showed that supplies costing $1,500 were on hand.
B. On April 1, 2013, the firm bought equipment costing $20,000. The equipment has an expected useful life of 10 years and no salvage value. The firm will use the straight-line method of depreciation.
C. On April 1, 2013, the firm paid $7,200 rent in advance for a six-month period. The $7,200 was debited to the Prepaid Rent account.

Question 79

Read the description of following adjustments that are required at the end of the accounting period for Paulo Consulting Services. Record the necessary adjusting entries on page 2 of a general journal. Omit the descriptions.
A. Equipment purchased on January 1, 2013, for $24,000 has an estimated useful life of 5 years with no salvage value. Depreciation is computed using the straight-line method.
B. Signed a 3-month contract for $4,500 of prepaid advertising on January 1, 2013.
C. Prepaid rent for the year on January 1, 2013. Rent expired during the month of January 2013, $1,600.
D. Purchased supplies for $2,000 on January 1, 2013. Inventory of supplies was $1,200 on January 31, 2013.

Question 80

Read each of the following transactions for Gallagher Enterprises. Determine the accounts and amounts to be debited and credited in the necessary end-of-January adjustments.
A. On January 1, 2013, Gallagher Enterprises, a new firm, paid $6,000 rent in advance for a three-month period. The $6,000 was debited to the Prepaid Rent account.
B. On January 1, 2013, the firm bought supplies for $3,000. The $3,000 was debited to the Supplies account. An inventory of supplies at the end of June showed that supplies costing $1,000 were on hand.
C. On January 1, 2013, the firm bought equipment costing $12,000. The equipment has an expected useful life of 10 years and no salvage value. The firm will use the straight-line method of depreciation.