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| 1 | |
The purpose of adjusting entries is to: |
| | A) | recognize revenue earned but not yet recorded. |
| | B) | recognize expenses incurred but not yet recorded. |
| | C) | recognize the earned portion of services paid for in advance. |
| | D) | recognize all of the above. |
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| 2 | |
Which of the following is not one of the four general categories of adjusting entries? |
| | A) | Converting assets to expenses |
| | B) | Converting liabilities to revenues |
| | C) | Converting liabilities to expenses |
| | D) | Accruing unpaid expenses |
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| 3 | |
Every adjusting entry involves the recognition of either revenue or expense. Which of the following is also true? |
| | A) | There also must be a corresponding change in capital stock. |
| | B) | There also must be a corresponding change in either assets or liabilities. |
| | C) | There also must be a corresponding change in the cash account. |
| | D) | Both (A) and (B). |
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| 4 | |
When accruing unpaid expenses, the required adjusting entry will include which of the following? |
| | A) | A debit an expense account and credit a liability account |
| | B) | A debit an expense account and credit an owners' equity account |
| | C) | A debit an expense and credit cash |
| | D) | A debit an expense and credit Retained Earnings |
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| 5 | |
When accruing uncollected income, the required adjusting entry will consist of which of the following? |
| | A) | A debit to an asset account and a credit to owners' equity |
| | B) | A debit to an asset account and a credit to a revenue account |
| | C) | A debit to an asset account and a credit to a liability account |
| | D) | None of the above |
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| 6 | |
In a prior period cash was paid in advance for an incurring expense. The required adjusting entry recognizes which of the following? |
| | A) | The portion of the asset consumed or expensed, and reduces the balance of an asset account |
| | B) | The portion earned as revenue, and reduces the balance of a liability account |
| | C) | The expense incurred, and records a liability for future payment |
| | D) | The revenue earned but not yet received, and records a receivable |
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| 7 | |
In the current period, services were performed and delivered but the customer was not billed. The required adjusting entry recognizes which of the following? |
| | A) | The portion of the asset consumed or expensed, and reduces the balance of an asset account |
| | B) | The portion earned as revenue, and reduces the balance of a liability account |
| | C) | The expense incurred, and records a liability for future payment |
| | D) | The revenue earned but not yet received, and records a receivable |
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| 8 | |
In the current period, wages were incurred that will be paid in the next accounting period. The required adjusting entry recognizes which of the following? |
| | A) | The portion of the asset consumed or expensed, and reduces the balance of an asset account |
| | B) | The portion earned as revenue, and reduces the balance of a liability account |
| | C) | The expense incurred, and records a liability for future payment |
| | D) | The revenue earned but not yet received, and records a receivable |
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| 9 | |
In the past period, customers paid for operas that were performed in the current period. The required adjusting entry recognizes which of the following? |
| | A) | The portion of the asset consumed or expensed, and reduces the balance of an asset account |
| | B) | The portion earned as revenue, and reduces the balance of a liability account |
| | C) | The expense incurred, and records a liability for future payment |
| | D) | The revenue earned but not yet received, and records a receivable |
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| 10 | |
When adjusting a prepaid expense account, a portion of an asset is recognized as which of the following? |
| | A) | An expense |
| | B) | Revenue |
| | C) | A liability |
| | D) | Another asset |
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| 11 | |
Which of the following is true about recording prepayments directly to an expense account? |
| | A) | It is an acceptable practice. |
| | B) | It is rarely, if ever, done. |
| | C) | It should never be done. |
| | D) | It will always require a credit to the cash account. |
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| 12 | |
When recording the adjusting entry to recognize the consumed portion of unexpired insurance, the adjusting entry will include which of the following? |
| | A) | A debit to Insurance Expense |
| | B) | A debit to Unexpired Insurance |
| | C) | A credit to Cash |
| | D) | A credit to Insurance Expense |
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| 13 | |
The original cost of a physical asset was $45,000. It was purchased on January 5, 2004. It has an estimated useful life of 10 years and has been depreciated under the straight-line method for 5 years. At the end of the 6th year, after adjusting entries have been recorded and posted, the book value of the physical asset will be which of the following? |
| | A) | $22,500 |
| | B) | $27,000 |
| | C) | $18,000 |
| | D) | $40,500 |
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| 14 | |
The original cost of a physical asset was $45,000. It was purchased on July 5, 2005. It has an estimated useful life of 10 years and has been depreciated under the straight-line method for 5 years. At the end of the 6th year, after adjusting entries have been recorded and posted, the book value of the physical asset will be which of the following? |
| | A) | $20,250 |
| | B) | $27,000 |
| | C) | $18,000 |
| | D) | $40,500 |
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| 15 | |
Which of the following is true? |
| | A) | Depreciation is an accurate measure of the allocation of the cost of an asset over its useful life. |
| | B) | Depreciation is an estimated measure of the allocation of the cost of an asset over its useful life. |
| | C) | Depreciation provides for an accumulation of cash to replace the asset. |
| | D) | Depreciation affects the cash flow of the entity. |
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| 16 | |
On November 1, a building with an estimated life of 15 years and no estimated salvage value was purchased for $180,000. The adjusting entry on November 30 will include which of the following? |
| | A) | A debit to Depreciation Expense for $12,000 |
| | B) | A debit to Depreciation Expense for $1,000 |
| | C) | A credit to Accumulated Depreciation: Building for $12,000 |
| | D) | Both (A) and (C) |
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| 17 | |
When adjusting an unearned revenue account, which of the following should occur? |
| | A) | A portion of a liability is recognized as an expense. |
| | B) | A portion of a liability is recognized as revenue. |
| | C) | A portion of a revenue account is recognized as a liability. |
| | D) | A portion of a liability is recognized as another liability. |
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| 18 | |
On November 18, the company received $24,000 for services to be performed over the following three months. Cash was debited for $24,000 and Unearned Services Revenue was credited for $24,000. None of the services were provided in November. One-third of the services were completed by December 31. The adjusting entry for December 31 would include which of the following? |
| | A) | A debit to Unearned Services Revenue and a credit to Accounts Receivable for $8,000. |
| | B) | A credit to Services Revenue and a debit to Cash for $16,000 |
| | C) | A credit to Services Revenue and a debit to Accounts Receivable for $8,000 |
| | D) | A debit to Unearned Services Revenues and a credit to Services Revenue for $8,000 |
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| 19 | |
When the adjusting entry for an accrued expense is made, which of the following will occur? |
| | A) | An expense is increased and a liability is increased. |
| | B) | An expense is increased and an asset is decreased. |
| | C) | An expense is increased and a liability is decreased. |
| | D) | An expense is increased and an asset is increased.
E. None of the above will occur. |
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| 20 | |
On November 16, the company borrowed $24,000 for 90 days at 6% interest. Interest expense was not adjusted at the end of November. The adjusting entry made on December 31 would include which of the following? |
| | A) | A debit to Interest Expense of $360 |
| | B) | A debit to Interest Expense of $120 |
| | C) | A credit to Interest Payable of $180 |
| | D) | A credit to Interest Payable of $480 |
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| 21 | |
On November 16, the company borrowed $24,000 for 60 days at 8% interest. An adjusting entry for accrued interest payable was made on December 31, the end of the fiscal year. When the note is paid on January 15, the Interest Expense account will be debited for which amount? |
| | A) | $320 |
| | B) | $160 |
| | C) | $240 |
| | D) | $80 |
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| 22 | |
When adjusting for revenue that has accrued (been earned) but has not been recorded, which of the following will occur? |
| | A) | An asset account is increased and a revenue account is increased. |
| | B) | A revenue account is increased and an expense account is increased. |
| | C) | A revenue account is increased and a liability account is decreased. |
| | D) | A revenue account is increased and a liability account is increased. |
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| 23 | |
The final adjusting entry usually involves which of the following? |
| | A) | Unearned revenues |
| | B) | Accrued revenues |
| | C) | Accrued income taxes |
| | D) | Prepaid expenses |
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| 24 | |
In unprofitable periods, if the Income Taxes Payable account has an ending debit balance it is classified in the balance sheet as which of the following? |
| | A) | A contra-liability account |
| | B) | A reduction from retained earnings |
| | C) | An asset |
| | D) | An accrued liability |
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| 25 | |
In unprofitable periods, if the Income Taxes Payable has an ending debit balance it is reclassified as which of the following? |
| | A) | An increase to the loss before income taxes. |
| | B) | An expense. |
| | C) | Revenue. |
| | D) | An asset |
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| 26 | |
The realization principle requires: |
| | A) | that revenues earned but not yet received be recognized through an adjusting entry. |
| | B) | that unearned revenues originally recorded as earned be converted to a liability through an adjusting entry. |
| | C) | that the consumption of assets originally recorded as assets be recognized as expenses through an adjusting entry. |
| | D) | both (A) and (B). |
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| 27 | |
The matching principle requires: |
| | A) | that revenues earned but not yet received be recognized through an adjusting entry. |
| | B) | that unearned revenues originally recorded as earned be converted to a liability through an adjusting entry. |
| | C) | that the consumption of assets originally recorded as assets be recognized as expenses through an adjusting entry. |
| | D) | both (A) and (B). |
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| 28 | |
Your company has a policy of recording all consumable assets costing $200 or less as an expense, rather than as a prepaid expense (asset). This policy is based on which of the following? |
| | A) | Materiality concept |
| | B) | Realization principle |
| | C) | Matching principle |
| | D) | Going-concern concept |
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| 29 | |
Which of the following is false? |
| | A) | The materiality concept permits charging purchases of low cost items directly to an expense account. |
| | B) | Debiting utilities expense when paid, rather than as the services are used, adheres to the matching principle. |
| | C) | Immaterial amounts of unrecorded expenses may be ignored during the adjusting process. |
| | D) | Adjusting entries may be made based on estimates. |
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| 30 | |
After the end-of-period adjusting entries are recorded and posted, the next step in the end-of-period procedures requires which of the following? |
| | A) | Recording business transactions of the subsequent period |
| | B) | Preparing an adjusted trial balance |
| | C) | Preparing financial statements |
| | D) | Determining which adjusting entries to erase to reduce the income tax burden |
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| 31 | |
An adjusting entry was made in which Unearned Services Revenue was debited for $4,000 and Services Revenue was credited for $4,000. However, this journal entry was posted to the Unearned Services Revenue account as a debit and to the Office Supplies Expense account as a credit. As a consequence of this error, the: |
| | A) | trial balance will have a credit balance $4,000 greater than the debit balance. |
| | B) | trial balance will have equal totals of debit and credit balances. |
| | C) | trial balance will have a debit balance $4,000 greater than the credit balance. |
| | D) | net income will be overstated $4,000. |
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| 32 | |
Only the $2,000 debit portion was posted of an adjusting entry in which Insurance Expense was debited and Unexpired Insurance was credited. As a consequence of this error, the adjusted trial balance will: |
| | A) | have a credit balance $2,000 greater than the debit balance. |
| | B) | have equal totals of debit and credit balances. |
| | C) | have a debit balance $2,000 greater than the credit balance. |
| | D) | be understated $2,000. |
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