Deck 5: Adjusting Entries and the Work Sheet

Question 1

Accounting for revenue on a cash basis means that no entry of revenue is made in the account until the cash is received for the services performed.

Answer 1

True

Question 2

"Adjusting" is written in the Item column of the general ledger when posting adjusting entries.

Answer 2

True

Question 3

A contra-asset is deducted from the related asset on the balance sheet.

Answer 3

True

Question 4

The matching of assets and expenses of a business on a periodic basis is referred to as the matching concept.

Question 5

A contra-asset has a debit balance.

Question 6

Adjusting entries affect only the owner's equity accounts.

Question 7

The book value of a plant asset is determined by subtracting the accumulated depreciation from the cost of the plant asset.

Question 8

If the total credits exceed total debits in the Income Statement columns of the work sheet, the business has had a net loss.

Question 9

A manual work sheet is usually prepared in pencil.

Question 10

Under the modified cash basis of accounting, adjustments are made only for prepaid items and depreciation on plant and equipment.

Question 11

A contra-asset appears on the income statement.

Question 12

When an account balance is not affected by an adjusting entry, the amount shown in the Trial Balance columns is extended directly to the Adjusted Trial Balance columns.

Question 13

The income statement reports earnings on a specific date.

Question 14

A fiscal year is always the same as the calendar year.

Question 15

Under the modified cash basis of accounting, cash payments for assets with lives longer than one accounting period (buildings, equipment, insurance, etc.) are recorded as assets and adjustments are made each period.

Question 16

The cost of plant assets less the accumulated depreciation is called the salvage value of the asset.

Question 17

The original cost of an asset less the trade-in or salvage value of an asset equals the depreciable cost of that asset.

Question 18

The matching principle offers the best measure of net income.

Question 19

A 12-month fiscal year can end any month of the calendar year.

Question 20

Depreciable cost is the amount of depreciation expense recorded for each accounting period.

Question 21

The balance sheet reports assets, liabilities, and owner's equity for a specific period of time.

Question 22

Depreciation matches the cost of an asset against the revenues it will produce.

Question 23

Depreciation expense is recorded for a specific period of time.

Question 24

If the debits in the Income Statement columns of the work sheet total $50,000 and the credits total $60,000 before net income or net loss has been determined, the business has a net income of $10,000.

Question 25

The net income or loss for the year can be found on the work sheet as the balance item at the bottom of either the Balance Sheet columns or the Income Statement columns.

Question 26

The modified cash basis of accounting combines aspects of the cash method of accounting and the accrual method of accounting.

Question 27

The original cost of an asset added to its salvage value represents the depreciable cost of an asset.

Question 28

Adjusting entries always affect both the income statement and the balance sheet.

Question 29

The amount of depreciation taken each period will be the same using the straight-line method.

Question 30

The formula to calculate straight-line depreciation is depreciable cost times the expected life of the asset.

Question 31

The only correct way to change the balance of a ledger account is to make a journal entry.

Question 32

The historical cost principle allows for assets to be recorded at actual cost.

Question 33

The Income Statement columns of a work sheet include all revenue and expense accounts.

Question 34

It is not necessary to post adjusting entries.

Question 35

If the total of the Income Statement Credit column, before determining net income or net loss, exceeds the total of the Income Statement Debit column, the result is a net loss for the year.

Question 36

The owner's capital account in the last two columns of the work sheet is an up-to-date account and includes net income and withdrawals of the current period.

Question 37

Plant assets provide benefits over a long period of time.

Question 38

The 10-column work sheet is used to facilitate the preparation of the income statement, the statement of owner's equity, and the balance sheet.

Question 39

Recording adjustments on the work sheet has no effect on the ledger accounts.

Question 40

A contra-account is used with a related account to bring about an increase in the net amount of the two account balances.

Question 41

The time an asset is expected to last is called its

A) depreciation.
B) fiscal period.
C) net loss value.
D) useful life.

Question 42

The fourth pair of columns on a 10-column work sheet prepared at the end of the period would be the

A) Income Statement columns.
B) Adjustments columns.
C) Balance Sheet columns.
D) Adjusted Trial Balance columns.

Question 43

If the book value of an asset is $12,500 and the accumulated depreciation is $3,500, the original cost of the asset is

A) $16,000.
B) $9,500.
C) $9,000.
D) $7,500.

Question 44

Matching the cost of an asset with the revenue it is expected to produce is called

A) adjusting.
B) expensing.
C) depreciation.
D) contra-valuing.

Question 45

To record wages earned but not paid under the modified cash accounting method,

A) debit Wages Payable and credit Wages Expense.
B) debit Cash and credit Wages Expense.
C) debit Wages Expense and credit Wages Payable.
D) no entry is required.

Question 46

When posting an adjusting entry to the general ledger, write

A) "adjusting" in the Posting Reference column.
B) "adjusting" in the Item column.
C) "ledger" in the general ledger.
D) "balance" in the work sheet.

Question 47

An account used with a related account to bring about a decrease in the net amount of the two account balances is called a(n)

A) contra-account.
B) expense account.
C) adjusting account.
D) revenue account.

Question 48

Under the cash basis of accounting, a certain expense may be incurred in one period but not entered until the following period.

Question 49

The balance sheet reports

A) assets.
B) revenue.
C) expenses.
D) net income.

Question 50

Accounting for expenses on the cash basis generally means that expenses are entered in the accounts even though they may have been charged and not paid for in cash.

Question 51

The cash basis of accounting and the accrual basis of accounting result in the same measures of net income.

Question 52

The cost of an asset that is subject to depreciation is called

A) salvage value.
B) depreciable cost.
C) revenue.
D) trade-in value.

Question 53

If a business records revenue when it is received and records the purchase of a building as an asset and makes adjustments to allocate the cost of the building over many accounting periods, the business accounting system is a(n)

A) accrual basis of accounting.
B) adjustment basis of accounting.
C) cash basis of accounting.
D) modified cash basis of accounting.

Question 54

The business or professional person using the cash basis of accounting takes the view that there is no revenue until it is received in such a form that it can be spent.

Question 55

While certain distinctive problems may arise in keeping the accounts of any specific enterprise, the principles of accounting on the cash basis are generally the same.

Question 56

The third pair of columns on a 10-column work sheet prepared at the end of the period would be the

A) Income Statement columns.
B) Adjustments columns.
C) Balance Sheet columns.
D) Adjusted Trial Balance columns.

Question 57

The cash basis of accounting is used by some small businesses and by most individuals for tax purposes.

Question 58

A net loss is shown on the work sheet as a(n)

A) debit in the Balance Sheet columns.
B) credit in the Balance Sheet columns.
C) debit and a credit in the Balance Sheet columns.
D) adjustment to owner's equity.

Question 59

A computer workstation cost $28,000, has an expected life of 7 years, and an expected salvage value of $7,000. Depreciation expense using the straight-line method will be $3,000 per year.

Question 60

The second pair of columns on a 10-column work sheet prepared at the end of the period would be the

A) Income Statement columns.
B) Trial Balance columns.
C) Adjustments columns.
D) Adjusted Trial Balance columns.

Question 61

Match the terms with the definitions.a.Adjusted Trial Balance columns
b.Adjusting entries
c.Balance Sheet columns
d.book value
e.contra-asset
f.depreciable cost
g.depreciation
h.fiscal year
i.historical cost principle
j.Income Statement columns
k.market value
l.matching principle
m.plant assets
n.salvage value
o.straight-line method
p.undepreciated cost
q.useful life
r.work sheet
A principle that requires the matching of revenues earned during an accounting period with the expenses incurred to produce the revenues.

Question 62

Match the terms with the definitions.a.Adjusted Trial Balance columns
b.Adjusting entries
c.Balance Sheet columns
d.book value
e.contra-asset
f.depreciable cost
g.depreciation
h.fiscal year
i.historical cost principle
j.Income Statement columns
k.market value
l.matching principle
m.plant assets
n.salvage value
o.straight-line method
p.undepreciated cost
q.useful life
r.work sheet
The amount an item can be sold for under normal economic conditions.

Question 63

In completing the work sheet, what is the reason for adding the net income for the year to the Balance Sheet Credit column?

A) Owner's equity is not up-to-date.
B) Cash is not up-to-date.
C) Owner's withdrawal is not up-to-date.
D) Sales is not up-to-date.

Question 64

Match the terms with the definitions.a.Adjusted Trial Balance columns
b.Adjusting entries
c.Balance Sheet columns
d.book value
e.contra-asset
f.depreciable cost
g.depreciation
h.fiscal year
i.historical cost principle
j.Income Statement columns
k.market value
l.matching principle
m.plant assets
n.salvage value
o.straight-line method
p.undepreciated cost
q.useful life
r.work sheet
The cost of an asset that is subject to depreciation.

Question 65

Match the terms with the definitions.a.Adjusted Trial Balance columns
b.Adjusting entries
c.Balance Sheet columns
d.book value
e.contra-asset
f.depreciable cost
g.depreciation
h.fiscal year
i.historical cost principle
j.Income Statement columns
k.market value
l.matching principle
m.plant assets
n.salvage value
o.straight-line method
p.undepreciated cost
q.useful life
r.work sheet
A form used to pull together all of the information needed to enter adjusting entries and prepare the financial statements.

Question 66

Match the terms with the definitions.a.Adjusted Trial Balance columns
b.Adjusting entries
c.Balance Sheet columns
d.book value
e.contra-asset
f.depreciable cost
g.depreciation
h.fiscal year
i.historical cost principle
j.Income Statement columns
k.market value
l.matching principle
m.plant assets
n.salvage value
o.straight-line method
p.undepreciated cost
q.useful life
r.work sheet
A twelve-month period for which financial reports are prepared.

Question 67

The first pair of columns on a 10-column work sheet would be the

A) Income Statement columns.
B) Balance Sheet columns.
C) Adjusted Trial Balance columns.
D) Trial Balance columns.

Question 68

Match the terms with the definitions.a.Adjusted Trial Balance columns
b.Adjusting entries
c.Balance Sheet columns
d.book value
e.contra-asset
f.depreciable cost
g.depreciation
h.fiscal year
i.historical cost principle
j.Income Statement columns
k.market value
l.matching principle
m.plant assets
n.salvage value
o.straight-line method
p.undepreciated cost
q.useful life
r.work sheet
The work sheet columns that show the amounts that will be reported in the statement of owner's equity and balance sheet.

Question 69

Match the terms with the definitions.a.Adjusted Trial Balance columns
b.Adjusting entries
c.Balance Sheet columns
d.book value
e.contra-asset
f.depreciable cost
g.depreciation
h.fiscal year
i.historical cost principle
j.Income Statement columns
k.market value
l.matching principle
m.plant assets
n.salvage value
o.straight-line method
p.undepreciated cost
q.useful life
r.work sheet
A principle that requires assets to be recorded at their actual cost.

Question 70

Match the terms with the definitions.a.Adjusted Trial Balance columns
b.Adjusting entries
c.Balance Sheet columns
d.book value
e.contra-asset
f.depreciable cost
g.depreciation
h.fiscal year
i.historical cost principle
j.Income Statement columns
k.market value
l.matching principle
m.plant assets
n.salvage value
o.straight-line method
p.undepreciated cost
q.useful life
r.work sheet
A depreciation method in which the depreciable cost is divided by the estimated useful life.

Question 71

Net income is shown on the work sheet as a

A) debit in the Balance Sheet column.
B) credit in the Income Statement column.
C) debit in the Income Statement column.
D) debit in the Adjustments column.

Question 72

Owner's equity at the start of the period is $35,000; net income for the period is $30,000; the total investments by the owner is $15,000; and total withdrawals by the owner is $5,000. The owner's equity at the end of the period is

A) $80,000.
B) $75,000.
C) $85,000.
D) $40,000.

Question 73

What does the credit balance in the Accumulated Depreciation account represent?

A) the cost of additional equipment purchased this year
B) the amount of depreciation taken in past years
C) the cost of existing equipment sold during the year
D) the amount of depreciation taken in the current year

Question 74

Match the terms with the definitions.a.Adjusted Trial Balance columns
b.Adjusting entries
c.Balance Sheet columns
d.book value
e.contra-asset
f.depreciable cost
g.depreciation
h.fiscal year
i.historical cost principle
j.Income Statement columns
k.market value
l.matching principle
m.plant assets
n.salvage value
o.straight-line method
p.undepreciated cost
q.useful life
r.work sheet
An account with a credit balance that is deducted from the related asset account on the balance sheet.

Question 75

The adjusting entry for the depreciation of office equipment for the period includes

A) debiting Depreciation Expense-Office Equipment and crediting Office Equipment.
B) debiting Office Equipment and crediting Accumulated Depreciation-Office Equipment.
C) debiting Depreciation Expense-Office Equipment and crediting Accumulated Depreciation-Office Equipment.
D) debiting Office Equipment and crediting Depreciation Expense-Office Equipment.

Question 76

Match the terms with the definitions.a.Adjusted Trial Balance columns
b.Adjusting entries
c.Balance Sheet columns
d.book value
e.contra-asset
f.depreciable cost
g.depreciation
h.fiscal year
i.historical cost principle
j.Income Statement columns
k.market value
l.matching principle
m.plant assets
n.salvage value
o.straight-line method
p.undepreciated cost
q.useful life
r.work sheet
A method of matching an asset's original cost against the revenues produced over its useful life.

Question 77

The fifth pair of columns on a 10-column work sheet prepared at the end of the period would be the

A) Income Statement columns.
B) Adjustments columns.
C) Balance Sheet columns.
D) Adjusted Trial Balance columns.

Question 78

Match the terms with the definitions.a.Adjusted Trial Balance columns
b.Adjusting entries
c.Balance Sheet columns
d.book value
e.contra-asset
f.depreciable cost
g.depreciation
h.fiscal year
i.historical cost principle
j.Income Statement columns
k.market value
l.matching principle
m.plant assets
n.salvage value
o.straight-line method
p.undepreciated cost
q.useful life
r.work sheet
The period of time that an asset is expected to help produce revenues.

Question 79

Supplies originally cost $500, but only $150 worth of supplies were used this period. The adjusting entry would be

A) debit Supplies Expense, $150; credit Supplies, $150.
B) debit Supplies Expense, $350; credit Supplies, $350.
C) debit Supplies, $150; credit Supplies Expense, $150.
D) debit Supplies, $350; credit Supplies Expense, $350.

Question 80

Match the terms with the definitions.a.Adjusted Trial Balance columns
b.Adjusting entries
c.Balance Sheet columns
d.book value
e.contra-asset
f.depreciable cost
g.depreciation
h.fiscal year
i.historical cost principle
j.Income Statement columns
k.market value
l.matching principle
m.plant assets
n.salvage value
o.straight-line method
p.undepreciated cost
q.useful life
r.work sheet
The expected market value of an asset at the end of its useful life.