Question 1

A contra asset account is subtracted from a related account in the balance sheet.

Accepted Answer

A) True 
 B)False

Question 2

Presented below are the basic assumptions and principles underlying financial statements.

Accepted Answer

The answer of Presented below are the basic assumptions and...

Question 3

In its first period of operations, Wallowa Company purchased supplies costing $6,000 and debited Supplies for the full amount. At the end of the accounting period, a physical count of supplies revealed $1,800 still on hand. The adjusting journal entry to be made at the end of the period would be

Accepted Answer

A)  Debit Supplies Expense, $1,800; Credit Supplies, $1,800. 
B)  Debit Supplies, $4,200; Credit Supplies Expense, $4,200. 
C)  Debit Supplies Expense, $4,200; Credit Supplies, $4,200. 
D)  Debit Supplies, $1,800; Credit Supplies Expense, $1,800.

Question 4

Instructions
Calculate the following for 2022:
1. Cash paid for supplies.
2. Cash paid for salaries and wages.

Accepted Answer

The answer of Instructions
Calculate the following for 2022:
1. Cash paid...

Question 5

The time period assumption states that the economic life of a business can be divided into

Accepted Answer

A)  equal time periods. 
B)  cyclical time periods. 
C)  artificial time periods. 
D)  perpetual time periods.

Question 6

An accounting period that is one year in length is referred to as a ______________ year.

Accepted Answer

The answer of An accounting period that is one year...

Question 7

The time assumption that the economic life of a business can be divided into artificial time periods is known as the

Accepted Answer

A)  time period assumption. 
B)  accounting period assumption. 
C)  timeliness assumption. 
D)  expense recognition principle.

Question 8

The Accumulated Depreciation account is a contra asset account that is reported on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 9

Accumulated Depreciation is

Accepted Answer

A)  an expense account. 
B)  an owner's equity account. 
C)  a liability account. 
D)  a contra asset account.

Question 10

Mal de Mere Cruises purchased a five-year insurance policy for its ships on April 1, 2022 for $50,000. Assuming that April 1 is the effective date of the policy, the adjusting entry on December 31, 2022 is

Accepted Answer

A)  
B)  
C)  
D)

Question 11

Rhodes National purchased equipment on October 1, 2022 for $14,400. The company expects to use the equipment for 3 years. It has no salvage value.
1. What adjusting journal entry should the company make at the end of each month if monthly financials are prepared? (annual depreciation is $4,800)
2. What balance will

Accepted Answer

The answer of Rhodes National purchased equipment on October 1,...

Question 12

If a resource has been consumed but a bill has not been received at the end of the accounting period, then

Accepted Answer

A)  an expense should be recorded when the bill is received. 
B)  an expense should be recorded when the cash is paid out. 
C)  an adjusting entry should be made recognizing the expense. 
D)  it is optional whether to record the expense before the bill is received.

Question 13

Cornhusker Supplies Inc. purchased a 12-month insurance policy on March 1, 2022 for $2,640. At March 31, 2022, the adjusting journal entry to record expiration of this asset will include a

Accepted Answer

A)  debit to Prepaid Insurance and a credit to Cash for $2,640. 
B)  debit to Prepaid Insurance and a credit to Insurance Expense for $275. 
C)  debit to Insurance Expense and a credit to Prepaid Insurance for $220. 
D)  debit to Insurance Expense and a credit to Cash for $220.

Question 14

Every adjusting entry affects one balance sheet account and one income statement account.

Accepted Answer

A) True 
 B)False

Question 15

Which one of the following is not a justification for adjusting entries?

Accepted Answer

A)  Adjusting entries are necessary to ensure that the revenue recognition principle is followed. 
B)  Adjusting entries are necessary to ensure that the expense recognition principle is followed. 
C)  Adjusting entries are necessary to enable financial statements to be in conformity with GAAP. 
D)  Adjusting entries are necessary to bring the general ledger accounts in line with the budget.

Question 16

Depreciation expense for a period is an ______________ rather than a factual measurement of cost that has expired.

Accepted Answer

The answer of Depreciation expense for a period is an...

Question 17

Doreen Isles runs Dodo's Dumplings, and she doesn't understand the Depreciation Expense she sees in her income statement, and the Accumulated Depreciation she sees in her balance sheet. Doreen says, "There shouldn't be any expense in the income statement; I paid for that equipment two years ago. And, since I paid for it, there shouldn't be a liability like Accumulated Depreciation". Explain the concept of depreciation to Doreen. Be sure to address her statement as part of your explanation.

Accepted Answer

The answer of Doreen Isles runs Dodo's Dumplings, and she...

Question 18

On March 1, a customer places an order for a wedding cake with Stick Boy Bakery. The customer is sent a statement on March 30 and a check is received on April 10. The cake is delivered to the wedding reception on May 2. The bakery shop follows GAAP and applies the revenue recognition principle. When is the revenue from the sale of the wedding cake considered to be recognized?

Accepted Answer

A)  March 1. 
B)  March 30. 
C)  April 10. 
D)  May 2.

Question 19

All of the accounts have normal balances. The following information below has been gathered at December 31, 2022.
1. Depreciation on the equipment for 2022 is $1,300.
2. New Slang Pest Control paid $2,220 for 12 months of insurance coverage on October 1, 2022.
3. New Slang Pest Control pays its employees total salaries of $11,000 every Monday for the preceding 5-day week (Monday-Friday). On Monday, December 27, 2022, employees were paid for the week ending December 24, 2022. All employees worked the five days ending December 31, 2022.
4. A count of supplies on December 31, 2022, indicates that supplies of $850 are on hand.
Instructions
Prepare in journal form with explanations, the annual adjusting entries for the four items listed for New Slang Pest Control.

Accepted Answer

The answer of All of the accounts have normal balances....

Question 20

Accounts often need to be adjusted because

Accepted Answer

A)  there are never enough accounts to record all the transactions. 
B)  many transactions affect more than one time period. 
C)  there are always errors made in recording transactions. 
D)  management can't decide what they want to report.

Exam 5: Adjusting the Accounts and Preparing an Adjusted Trial Balance

A contra asset account is subtracted from a related account in the balance sheet.

Presented below are the basic assumptions and principles underlying financial statements.

In its first period of operations, Wallowa Company purchased supplies costing $6,000 and debited Supplies for the full amount. At the end of the accounting period, a physical count of supplies revealed $1,800 still on hand. The adjusting journal entry to be made at the end of the period would be

Instructions Calculate the following for 2022: 1. Cash paid for supplies. 2. Cash paid for salaries and wages.

The time period assumption states that the economic life of a business can be divided into

An accounting period that is one year in length is referred to as a ______________ year.

The time assumption that the economic life of a business can be divided into artificial time periods is known as the

The Accumulated Depreciation account is a contra asset account that is reported on the balance sheet.

Accumulated Depreciation is

Mal de Mere Cruises purchased a five-year insurance policy for its ships on April 1, 2022 for $50,000. Assuming that April 1 is the effective date of the policy, the adjusting entry on December 31, 2022 is

If a resource has been consumed but a bill has not been received at the end of the accounting period, then

Cornhusker Supplies Inc. purchased a 12-month insurance policy on March 1, 2022 for $2,640. At March 31, 2022, the adjusting journal entry to record expiration of this asset will include a

Every adjusting entry affects one balance sheet account and one income statement account.

Which one of the following is not a justification for adjusting entries?

Depreciation expense for a period is an ______________ rather than a factual measurement of cost that has expired.

Accounts often need to be adjusted because