Question 1

At year-end,the balance in the prepaid insurance account,prior to any adjustments,is $6,000.The amount of the journal entry required to record insurance expense will be $4,000 if the amount of unexpired insurance applicable to future periods is $2,000.

Accepted Answer

A) True 
 B)False

Question 2

Depreciation Expense and Accumulated Depreciation are classified,respectively,as

Accepted Answer

A)  expense,contra asset
B)  asset,contra liability
C)  revenue,asset
D)  contra asset,expenseE) None of the above
F) A) and D)

Question 3

The adjusting entry to adjust supplies was omitted at the end of the year.This would effect the income statement by having

Accepted Answer

A)  expenses understated and therefore net income overstated
B)  revenues understated and therefore net income understated
C)  expenses understated and therefore net income understated
D)  expenses overstated and therefore net income understatedE) A) and D)
F) A) and C)

Question 4

If the effect of the debit portion of an adjusting entry is to increase the balance of an expense account,which of the following describes the effect of the credit portion of the entry?

Accepted Answer

A)  decreases the balance of a stockholders' equity account
B)  increases the balance of a liability account
C)  increases the balance of an asset account
D)  decreases the balance of an expense accountE) B) and D)
F) C) and D)

Question 5

The financial statements are prepared from the unadjusted trial balance.

Accepted Answer

A) True 
 B)False

Question 6

Accumulated Depreciation accounts are liability accounts.

Accepted Answer

A) True 
 B)False

Question 7

When preparing an income statement vertical analysis,each revenue and expense is expressed as a percent of net income.

Accepted Answer

A) True 
 B)False

Question 8

Deferred revenue is revenue that is

Accepted Answer

A)  earned and the cash has been received
B)  earned but the cash has not been received
C)  not earned and the cash has not been received
D)  not earned but the cash has been receivedE) C) and D)
F) B) and C)

Question 9

The entry to adjust for the cost of supplies used during the accounting period is

Accepted Answer

A)  debit Supplies Expense;credit Supplies
B)  debit Retained Earnings;credit Supplies
C)  debit Accounts Payable;credit Supplies
D)  debit Supplies;credit Retained EarningsE) A) and B)
F) A) and C)

Question 10

Supplies are recorded as assets when purchased.Therefore,the credit to supplies in the adjusting entry is for the amount of supplies

Accepted Answer

A)  still on hand
B)  purchased
C)  used
D)  required for the next accounting periodE) A) and B)
F) A) and C)

Question 11

An adjusting entry would adjust revenue so it is reported when earned and not when cash is received.

Accepted Answer

A) True 
 B)False

Question 12

Vertical analysis is useful for analyzing financial statement changes over time.

Accepted Answer

A) True 
 B)False

Question 13

The matching concept supports matching expenses with the related revenues.

Accepted Answer

A) True 
 B)False

Question 14

Adjusting entries always include

Accepted Answer

A)  only income statement accounts.
B)  only balance sheet accounts.
C)  the cash account.
D)  at least one income statement account and one balance sheet account.E) A) and D)
F) A) and C)

Question 15

Which of the accounts below would most likely appear on an adjusted trial balance but probably would not appear on the unadjusted trial balance?

Accepted Answer

A)  Fees Earned
B)  Accounts Receivable
C)  Unearned Fees
D)  Depreciation ExpenseE) A) and B)
F) A) and C)

Question 16

A company pays $6,500 for two season tickets on September 1.If $2,500 is earned by December 31,the adjusting entry made at that time is debit Cash,$2,500 and credit Ticket Revenue,$2,500.

Accepted Answer

A) True 
 B)False

Question 17

Adjusting entries affect only expense and asset accounts.

Accepted Answer

A) True 
 B)False

Question 18

An adjusting entry would adjust an expense account so the expense is reported when incurred.

Accepted Answer

A) True 
 B)False

Question 19

Adjusting journal entries are dated on the last day of the period.

Accepted Answer

A) True 
 B)False

Question 20

The adjustment for accrued fees was debited to Accounts Payable instead of Accounts Receivable.This error will be detected when the Adjusted Trial Balance is prepared.

Accepted Answer

A) True 
 B)False

Exam 3: The Adjusting Process

The financial statements are prepared from the unadjusted trial balance.

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The entry to adjust for the cost of supplies used during the accounting period is

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At year-end,the balance in the prepaid insurance account,prior to any adjustments,is $6,000.The amount of the journal entry required to record insurance expense will be $4,000 if the amount of unexpired insurance applicable to future periods is $2,000.

Correct AnswerverifiedShow Answer

The matching concept supports matching expenses with the related revenues.

Correct AnswerverifiedShow Answer

Adjusting entries always include

Correct AnswerverifiedShow Answer

The adjustment for accrued fees was debited to Accounts Payable instead of Accounts Receivable.This error will be detected when the Adjusted Trial Balance is prepared.

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Adjusting entries affect only expense and asset accounts.

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Adjusting journal entries are dated on the last day of the period.

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Deferred revenue is revenue that is

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Accumulated Depreciation accounts are liability accounts.

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The adjusting entry to adjust supplies was omitted at the end of the year.This would effect the income statement by having

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A company pays $6,500 for two season tickets on September 1.If $2,500 is earned by December 31,the adjusting entry made at that time is debit Cash,$2,500 and credit Ticket Revenue,$2,500.

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When preparing an income statement vertical analysis,each revenue and expense is expressed as a percent of net income.

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Depreciation Expense and Accumulated Depreciation are classified,respectively,as

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If the effect of the debit portion of an adjusting entry is to increase the balance of an expense account,which of the following describes the effect of the credit portion of the entry?

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An adjusting entry would adjust revenue so it is reported when earned and not when cash is received.

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An adjusting entry would adjust an expense account so the expense is reported when incurred.

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Supplies are recorded as assets when purchased.Therefore,the credit to supplies in the adjusting entry is for the amount of supplies

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Which of the accounts below would most likely appear on an adjusted trial balance but probably would not appear on the unadjusted trial balance?

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Vertical analysis is useful for analyzing financial statement changes over time.

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