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1
An end-of-period journal entry in which the Office Supplies Expense account is debited and the Office Supplies account is credited is an example of an adjusting entry.
A)True
B)False
2
For most companies, adjusting entries are made on a yearly basis.
A)True
B)False
3
Most adjusting entries fall into one of three categories.
A)True
B)False
4
Adjusting entries may involve recording expenses before they are due to be paid.
A)True
B)False
5
Adjusting entries may involve recording revenues before cash is received.
A)True
B)False
6
To accrue means to grow or accumulate over time.
A)True
B)False
7
For every accrued expense there will be a corresponding change in accrued revenue.
A)True
B)False
8
Most adjusting entries involve the Cash account.
A)True
B)False
9
Adjusting entries are based on the concepts of accrual accounting, not upon monthly bills or month-end transactions.
A)True
B)False
10
Adjusting entries have an effect on owners' equity.
A)True
B)False
11
A prepaid expense is an asset account representing advance payment of an expense of future accounting periods.
A)True
B)False
12
Recording an adjusting entry for prepaid expenses will increase an expense and decrease an asset.
A)True
B)False
13
The December 31 adjusting entry for the Unexpired Insurance account balance of $3,600, which represents 24 months of insurance purchased on January 1, requires a debit to Insurance Expense and a credit to Unexpired Insurance for $1,800.
A)True
B)False
14
One way to handle prepaid expenses is to charge them initially to an appropriate expense account and at the end of the accounting period transfer the unused portion to an appropriate prepaid account.
A)True
B)False
15
The December 31 adjusting entry for the Insurance Expense account balance of $3,600, which represents 36 months of insurance purchased on January 1, requires a debit to Insurance Expense and a credit to Unexpired Insurance for $1,200
A)True
B)False
16
A prepayment is an asset that later becomes an expense.
A)True
B)False
17
An asset's useful life is the period over which the cost of the asset is allocated to depreciation expense.
A)True
B)False
18
Physical objects with a limited life, such as office equipment and buildings, are known as depreciable assets.
A)True
B)False
19
The systematic allocation of the cost of an asset to expense during the periods of its useful life is called depreciation.
A)True
B)False
20
Office equipment, machinery, buildings, and land are subject to depreciation.
A)True
B)False
21
The rationale for depreciation lies in the realization principle.
A)True
B)False
22
The widely used approach of recognizing an equal amount of depreciation expense in each period of a depreciable asset's useful life is called straight-line depreciation.
A)True
B)False
23
An accumulated depreciation account is a contra-asset account shown as a deduction from the related asset account in the balance sheet.
A)True
B)False
24
For depreciable assets, book value represents cost minus accumulated depreciation.
A)True
B)False
25
The Accumulated Depreciation account is an example of an account with a normal debit balance.
A)True
B)False
26
An asset with a cost of $10,000, a life of 10 years, and no salvage value, will have a book value of $5,000 at the end of the five years using straight-line depreciation.
A)True
B)False
27
The adjusting entry for depreciation decreases assets and decreases owners' equity.
A)True
B)False
28
Book value is based on the estimated costs and the estimated useful life of the asset.
A)True
B)False
29
The Accumulated Depreciation account represents cash set aside to replace the asset when it is no longer useful to the business.
A)True
B)False
30
The receipt of payment for services in advance of performing those services is treated as deferred revenue.
A)True
B)False
31
Under the accrual method of accounting, it is unacceptable to record as revenue a payment received by a customer for services to be performed in a subsequent accounting period.
A)True
B)False
32
If, on December 1, you received $5,000 for services to be performed and delivered in January, you might record the $5,000 as an increase in Services Revenues or as an increase in Unearned Services Revenues.
A)True
B)False
33
Unearned revenue account balances are reported on the balance sheet as assets.
A)True
B)False
34
To accrue expenses is to delay the recognition of the expenses until after they have been paid.
A)True
B)False
35
The October 31 accrual of interest expense on a 30-day, 6%, $6,000 note payable that is dated October 15 will be $6.
A)True
B)False
36
If, on December 31, accrued wages of $4,500 was recognized in an adjusting entry, and on January 10 the total wages of $28,000 are paid, the journal entry to record the payment will reduce owners' equity by $28,000.
A)True
B)False
37
Accruing uncollected revenue involves an adjustment to a liability account.
A)True
B)False
38
Adjusting for income tax at the end of the accounting period requires a debit to an income tax expense account and a credit to an income tax payable account.
A)True
B)False
39
The income tax liability for corporations is paid in four installments.
A)True
B)False
40
No adjusting entry for income taxes is necessary at the end of an unprofitable accounting period.
A)True
B)False
41
Income taxes reduce the size of profits and increase the size of losses.
A)True
B)False
42
The realization principle is the rationale for recording services paid in advance of performing the services as a liability (unearned revenue).
A)True
B)False
43
The accounting principle of realization is the authority for recording adjusting entries for accrued expenses.
A)True
B)False
44
Debiting the Office Supplies account for the purchase of a small amount of miscellaneous office supplies (physical assets) is a convenient and efficient method of recording the expenditure when the amounts or items are immaterial in nature.
A)True
B)False
45
The accounting treatment accorded to immaterial items may be guided by convenience rather than by theoretical principles.
A)True
B)False
46
There are very specific rules governing when an amount is material and when it is immaterial.
A)True
B)False
47
Every adjusting entry for an accrual or a deferral will have an effect on either revenues or expenses of the time period.
A)True
B)False
48
A schedule indicating the balances in ledger accounts after end-of-period adjusting entries have been posted is called an adjusted trial balance.
A)True
B)False





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