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Exam 3: The Adjusting Process

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Question 1

Multiple Choice

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What effect will this adjusting journal entry have on the accounting records?

A) Increase income
B) Decrease net income
C) Decrease expenses
D) Increase assets

E) A) and B)
F) None of the above

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Question 2

Multiple Choice

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Depreciation Expense and Accumulated Depreciation are classified, respectively, as

A) expense, contra asset
B) asset, contra liability
C) revenue, asset
D) contra asset, expense

E) All of the above
F) B) and D)

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Question 3

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On March 1, a business paid $3,600 for a twelve month liability insurance policy. On April 1 the same business entered into a two-year rental contract for equipment at a total cost of $18,000. Determine the following amounts: (a) insurance expense for the month of March (b) prepaid insurance as of March 31 (c) equipment rent expense for the month of April (d) prepaid equipment rental as of April 30

A business pays weekly salaries of $25,000 on Friday for a five-day week ending on that day. The adjusting entry necessary at the end of the fiscal period ending on Tuesday is

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

A business pays bi-weekly salaries of $20,000 every other Friday for a ten-day period ending on that day. The last pay day of December is Friday, December 27. Assuming the next pay period begins on Monday, December 30 and the proper adjusting entry is journalized at the end of the fiscal period (December 31) . The entry for the payment of the payroll on Friday, January 10 includes a:

Deferred revenue is revenue that is

Prepaid expenses are eventually expected to

Accruals are needed when an unrecorded expense has been incurred or an unrecorded revenue has been earned.

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

The company determines that the interest expense on a note payable for period ending December 31st is $775. This amount is payable on January 1st. Prepare the journal entries required on December 31st and January 1st.

A one-year insurance policy was purchased on October 1, 2011 for $4,200. The adjusting entry on December 31, 2010 would be:

If there is a balance in the unearned subscriptions account after adjusting entries are made, it represents a(n)

By ignoring and not posting the adjusting journal entries to the appropriate accounts, net income will always be overstated.

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?

Salaries of $6,400 are paid for a five-day week on Friday. Prepare the adjusting journal entry that is required if the month ends on Thursday.

At the end of the current year, $3,700 fees have been earned but have not been billed to clients. Journalize the adjusting entry to record the accrued fees.

At the end of the fiscal year, the usual adjusting entry for accrued salaries owed to employees was omitted. Which of the following statements is true?

Austin, Inc. made a Prepaid Rent payment of $3,500 on January 1st. The company's monthly rent is $700. The amount of Prepaid Rent that would appear on the January 31 balance sheet after adjustment is:

Adjusting entries always include