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119. A company recorded 2 days of accrued salaries of $1,400 for its employees on January
31. On February 9, it paid its employees $7,000 for these accrued salaries and for other
salaries earned through February 9. The January 31 and February 9 journal entries are:
A. 1/31 Salaries Expense ………………………… 1,400
Salaries Payable …………................ 1,400
2/9 Salaries Payable …………………………. 7,000
Salaries Expense ………………………… 1,400
Cash..………………………………… 7,000
B. 1/31 Salaries Payable ………………………….. 1,400
Salaries Expense……………………... 1,400
2/9 Salaries Expense………………………….. 5,600
Salaries Payable…………………………... 1,400
Cash…………………………………... 7,000
C. 1/31 Salaries Expense………………………….. 1,400
Cash………………………………….. 1,400
2/9 Salaries Expense…………………………. 7,000
Cash…………………………………. 7,000
D. 1/31 Salaries Expense…………………………. 1,400
Salaries Payable……………………... 1,400
2/9 Salaries Expense………………………….. 7,000
Cash…………………………………... 7,000
E. 1/31 Salaries Expense…………………………. 1,400
Salaries Payable……………………… 1,400
2/9 Salaries Expense………………………….. 5,600
Salaries Payable…………………………... 1,400
Cash…………………………………... 7,000
120. If accrued salaries were recorded on December 31 with a credit to Salaries Payable, the
entry to record payment of these wages on the following January 5 would include:
A. A debit to Cash and a credit to Salaries Payable.
B. A debit to Cash and a credit to Prepaid Salaries.
C. A debit to Salaries Payable and a credit to Cash.
D. A debit to Salaries Payable and a credit to Salaries Expense.
E. No entry would be necessary on January 5.
121. On May 1, Carter Advertising Company received $3,600 from Kaitlyn Breanna for
advertising services to be completed April 30 of the following year. The Cash receipt was
recorded as unearned fees. The adjusting entry for the year ended December 31, Year 2 would
include:
A. a debit to Earned Fees for $3,600.
B. a debit to Unearned Fees for $1,200.
C. a credit to Unearned Fees for $1,200.
D. a debit to Earned Fees for $2,400.
E. a credit Earned Fees for $2,400.
122. The balance in the prepaid insurance account before adjustment at the end of the year is
$4,800, which represents the insurance premiums for four months. The premiums were paid
on November 1. The adjusting entry required on December 31 is:
A. Debit Insurance Expense, $2,400; credit Prepaid Insurance, $2,400.
B. Debit Prepaid Insurance, $2,400; credit Insurance Expense, $2,400.
C. Debit Insurance Expense, $1,200; credit Prepaid Insurance, $1,200.
D. Debit Prepaid Insurance, $1,200; credit Insurance Expense, $1,200
E. Debit Cash, $4,800; Credit Prepaid Insurance, $4,800.
123. What is the proper adjusting entry at December 31, the end of the accounting period, if
the balance in the prepaid insurance account is $7,750 before adjustment, and the unexpired
amount per analysis of policies is, $3,250?
A. Debit Insurance Expense, $3,250; credit Prepaid Insurance, $3,250.
B. Debit Insurance Expense, $4,500; credit Prepaid Insurance, $4,500.
C. Debit Prepaid Insurance, $4,500; credit Insurance Expense, $4,500.
D. Debit Insurance Expense, $7,750; credit Prepaid Insurance, $7,750.
E. Debit Cash, $7,750; Credit Prepaid Insurance, $7,750.
124. On March 31, Phoenix, Inc. paid Melanie Publishing Company $15,480 for a 3-year
subscription for five different magazines. The subscriptions started immediately. What is the
amount of revenue that should be recorded by Melanie Publishing Company for each year of
the subscription assuming Melanie uses a calendar reporting period?
A. $15,480; $0; $0; $0.
B. $5,160; $5,160; $5,160.
C. $3,870; $5,160; $5,160; $1,290.
D. $0; $0; $0; $15,480.
E. The answer cannot be determined based on the information given.
125. On March 31, Phoenix, Inc. paid Melanie Publishing Company $15,480 for a 3-year
subscription for five different magazines. The subscriptions started immediately. What is the
adjusting entry that should be recorded by Melanie Publishing Company on December 31 of
the first year if the credit to record the collection was made to Unearned Fees?
A. debit Unearned Fees, $15,480; credit Fees Earned, $15,480.
B. debit Unearned Fees, $5,160; credit Fees Earned, $5,160.
C. debit Unearned Fees, $11,610; credit Fees Earned, $11,610.
D. debit Unearned Fees, $1,290; credit Fees Earned, $1,290.
E. debit Unearned Fees, $3,870; credit Fees Earned, $3,870.
126. On March 31, Phoenix, Inc. paid Melanie Publishing Company $15,480 for a 3-year
subscription for five different magazines. The subscriptions started immediately. What
amount should appear in the Prepaid Subscription account for Phoenix Company after
adjustments on December 31 each year assuming Phoenix using a calendar reporting period?
A. $15,480; $11,610; $6,540; $1,290.
B. $3,870; $5,160; $5,160; $1,290.
C. $5,160; $5,160; $5,160.
D. $11,610; $6,450; $1,290; $0.
E. The answer cannot be determined based on the information given.
127. A company made no adjusting entry for accrued and unpaid employee salaries of $9,000
on December 31. Which of the following statements is true?
A. It will have no effect on income.
B. It will overstate assets and liabilities by $9,000
C. It will understate net income by $9,000.
D. It will understate assets by $9,000.
E. It will understate expenses and overstate net income by $9,000.
128. A company made no adjusting entry for accrued and unpaid employee salaries of $9,000
on December 31. The entry to record the adjusting entry should have been:
A. debit Salary Expense, $9,000; credit Cash, $9,000
B. debit Salary Expense, $9,000; credit Fees Earned, $9,000
C. debit Salary Expense, $9,000; credit Prepaid Salary, $9,000
D. debit Salary Expense, $9,000; credit Salaries Payable, $9,000
E. debit Salaries Payable, $9,000; credit Salary Expense
129. A company purchased new computers at a cost of $14,000 on September 30. The
computers are estimated to have a useful life of 4 years and a salvage value of $2,000. The
company uses the straight-line method of depreciation. How much depreciation expense will
be recorded for the computers for the first year ended December 31?
A. $250
B. $750
C. $875
D. $1,000
E. $3,000
130. The balance in Tee Tax Services' office supplies account on February 1 and February 28
was $1,200 and $375, respectively. If the office supplies expense for the month is $1,900,
what amount of office supplies was purchased during February?
A. $1,075
B. $1,500
C. $1,525
D. $2,325
E. $3,100
131. Which of the following statements is incorrect?
A. An income statement reports revenues earned less expenses incurred.
B. An unadjusted trial balance shows the account balances after they have been revised to
reflect the effects of end-of-period adjustments.
C. Interim financial reports can be based on one-month or three-month accounting periods.
D. The fiscal year is any 12 consecutive months (or 52 weeks) used by a business as its annual
accounting period.
E. Property, plant, and equipment are referred to as plant assets.
132. A trial balance prepared after adjustments have been recorded is called a(n) :
A. Balance sheet.
B. Adjusted trial balance.
C. Unadjusted trial balance.
D. Classified balance sheet.
E. Unclassified balance sheet.
133. A trial balance prepared before any adjustments have been recorded is:
A. An adjusted trial balance.
B. Used to prepare financial statements.
C. An unadjusted trial balance.
D. Correct with respect to proper balance sheet and income statement amounts.
E. Only prepared once a year.
134. The adjusted trial balance contains information pertaining to:
A. Asset accounts only.
B. Balance sheet accounts only.
C. Income statement accounts only.
D. All general ledger accounts.
E. Revenue accounts only.
135. Financial statements are typically prepared in the following order:
A. Balance sheet, statement of owner's equity, income statement.
B. Statement of owner's equity, balance sheet, income statement.
C. Income statement, balance sheet, statement of owner's equity.
D. Income statement, statement of owner's equity, balance sheet.
E. Balance sheet, income statement, statement of owner's equity.
136. A balance sheet that places the assets above the liabilities and equity is called a(n):
A. Report form balance sheet.
B. Account form balance sheet.
C. Classified balance sheet.
D. Unadjusted balance sheet.
E. Unclassified balance sheet.
137. A balance sheet that places the liabilities and equity to the right of the assets is a(n):
A. Account form balance sheet.
B. Report form balance sheet.
C. Interim balance sheet.
D. Classified balance sheet.
E. Unclassified balance sheet.
138. Under the alternative method for accounting for unearned revenue, which of the
following pairs of journal entry formats is correct?
Initial Entry Adjusting Entry________
A)
Cash Unearned Consulting Revenue
Unearned Consulting Revenue Consulting Revenue
B)
Cash Consulting Revenue
Consulting Revenue Unearned Revenue
C)
Cash Unearned Revenue
Unearned Revenue Cash
D)
Consulting Revenue Unearned Revenue
Cash Consulting Revenue
E)
Cash Consulting Revenue
Unearned Revenue Unearned Revenue
A. Choice A
B. Choice B
C. Choice C
D. Choice D
E. Choice E
139. Under the alternative method for recording prepaid expenses, which is the correct set of
journal entries?
Initial Entry Adjusting Entry
A)
Insurance Expense Prepaid Insurance
Cash Insurance Expense
B)
Cash Prepaid Insurance
Insurance Expense Insurance Expense
C)
Prepaid Insurance Prepaid Insurance
Cash Insurance Expense
D)
Prepaid Insurance Insurance Expense
Cash Prepaid Insurance
E)
Prepaid Insurance Cash
Insurance Expense Prepaid Insurance
A. Choice A
B. Choice B
C. Choice C
D. Choice D
E. Choice E
140. Which of the following statements related to U.S. GAAP and IFRS is incorrect:
A. Both U.S. GAAP and IFRS include guidance for adjusting entries.
B. Both U.S. GAAP and IFRS prepare the same four financial statements.
C. U.S. GAAP does not require items to be separated by current and noncurrent classifications
on the balance sheet.
D. U.S. GAAP balance sheets report current items first.
E. IFRS balance sheets normally present noncurrent items first.
141. On December 1, Miller Company borrowed $300,000, at 8% annual interest, from the
Nomo Bank. Miller has 60 days before the first payment is required. What is the adjusting
entry that Miller would need to make on December 31, the calendar year-end?
A. debit Interest Payable, $2,000; credit Interest Expense, $2,000
B. debit Interest Expense, $2,000; credit Interest Payable, $2,000
C. debit Interest Expense, $2,000; credit Cash, $2,000
D. debit Interest Expense, $4,000; credit Interest Payable, $4,000.
E. debit Interest Expense, $24,000; credit Interest Payable, $24,000.
142. All of the following are true regarding prepaid expenses except:
A. They are paid for in advance of receiving their benefits.
B. They are assets.
C. When they are used, their costs become expenses.
D. The adjusting entry for prepaid expenses increases expenses and increases liabilities.
E. The adjusting entry for prepaid expenses increases expenses and decreases assets.
143. An annual reporting period consisting of any twelve consecutive months is known as:
A. Fiscal year.
B. Calendar year.
C. Interim financial period.
D. Natural business year.
E. Seasonal year.
144. Two accounting principles that are relied on in the adjusting process are:
A. Revenue recognition and monetary unit.
B. Revenue recognition and going-concern.
C. Matching and cost.
D. Matching and business entity.
E. Revenue recognition and matching.
145. All of the following are true regarding unearned revenues except:
A. They are payments received in advance of services performed.
B. The adjusting entry for unearned revenues increases assets and increases revenues.
C. The adjusting entry for unearned revenues increases revenues and decreases liabilities.
D. They are liabilities.
E. As they are earned, they become revenues.
146. Assuming prepaid expenses are originally recorded in balance sheet accounts, the
adjusting entry to record use of a prepaid expense is:
A. Increase an expense; increase a liability.
B. Increase an asset; increase revenue.
C. Decrease a liability; increase revenue.
D. Increase an expense; decrease an asset.
E. Increase an expense; decrease a liability.
147. Assuming unearned revenues are originally recorded in balance sheet accounts, the
adjusting entry to record earning of unearned revenue is:
A. Increase an expense; increase a liability.
B. Increase an asset; increase revenue.
C. Decrease a liability; increase revenue.
D. Increase an expense; decrease an asset.
E. Increase an expense; decrease a liability.
148. The adjusting entry to record an accrued expense is:
A. Increase an expense; increase a liability.
B. Increase an asset; increase revenue.
C. Decrease a liability; increase revenue.
D. Increase an expense; decrease an asset.
E. Increase an expense; decrease a liability.
149. The adjusting entry to record an accrued revenue is:
A. Increase an expense; increase a liability.
B. Increase an asset; increase revenue.
C. Decrease a liability; increase revenue.
D. Increase an expense; decrease an asset.
E. Increase an expense; decrease a liability.
150. On October 1, Haslip Company rented warehouse space to a tenant for $2,500 per
month. The tenant paid five months’ rent in advance on that date. The payment was recorded
to the Unearned Rent account. The company’s annual accounting period ends on December
31. The adjusting entry needed on December 31 is:
A. Debit Rent Receivable, $12,500; credit Rent Earned, $12,500.
B. Debit Rent Receivable, $7,500; credit Rent Earned, $7,500.
C. Debit Unearned Rent, $7,500; credit Rent Earned, $7,500.
D. Debit Unearned Rent, $5,000; credit Rent Earned, $5,000.
E. Debit Unearned Rent, $12,500; credit Rent Earned, $12,500.
151. Alex Company rents space to a tenant for $2,200 per month. The tenant currently owes
two months rent, November and December. The tenant has agreed to pay the November,
December, and January rents in full on January 15 and has agreed not to fall behind again.
The adjusting entry needed on December 31 is:
A. Debit Rent Receivable, $6,600; credit Rent Earned, $6,600.
B. Debit Unearned Rent, $4,400; credit Rent Earned, $4,400.
C. Debit Unearned Rent, $2,200; credit Rent Earned, $2,200.
D. Debit Rent Receivable, $4,400; credit Rent Earned, $4,400.
E. Debit Rent Receivable, $2,200; credit Rent Earned, $2,200.
152. Alex Company has 10 employees, who earn a total of $1,800 in salaries each working
day. They are paid on Monday for the five-day workweek ending on the previous Friday.
Assume that year ended December 31, is a Wednesday and all employees will be paid salaries
for five full days on the following Monday. The adjusting entry needed on December 31 is:
A. Debit Salaries Expense, $5,400; credit Salaries Payable, $5,400.
B. Debit Salaries Expense, $3,600; credit Salaries Payable, $3,600.
C. Debit Salaries Expense, $9,000; credit Salaries Payable, $9,000.
D. Debit Salaries Payable, $5,400; credit Salaries Expense, $5,400.
E. Debit Salaries Expense, $5,400; credit Cash, $5,400.
153. On January 1, Alco Company purchases manufacturing equipment costing $95,000 that
is expected to have a five-year life and an estimated salvage value of $5,000. Alco uses the
straight-line depreciation method to allocate costs. The adjusting entry needed on December
31 is:
A. Debit Depreciation Expense, $9,000; credit Accumulated Depreciation, $9,000.
B. Debit Depreciation Expense, $18,000; credit Accumulated Depreciation, $18,000.
C. Debit Depreciation Expense, $90,000; credit Accumulated Depreciation, $90,000.
D. Debit Depreciation Expense, $18,000; credit Equipment, $18,000.
E. Debit Depreciation Expense, $9,000; credit Equipment, $9,000.
154. On November 1, Jay Company loaned an affiliate $100,000 at a 9.0% interest rate. The
note receivable plus interest will not be collected until March 1 of the following year. The
company’s annual accounting period ends on December 31. The adjusting entry needed on
December 31 is:
A. Debit Interest Receivable, $750; credit Interest Revenue, $750.
B. Debit Interest Expense, $750; credit Interest Payable, $750.
C. Debit Interest Expense, $1,500; credit Interest Payable, $1,500.
D. Debit Interest Receivable, $2,250; credit Interest Revenue, $2,250.
E. Debit Interest Receivable, $1,500; credit Interest Revenue, $1,500.
155. Which of the following statements in incorrect:
A. An unadjusted trial balance is a list of accounts and balances prepared before adjustments
are recorded.
B. An adjusted trial balance is a list of accounts and balances prepared after adjusting entries
have been recorded and posted to the ledger.
C. Each trial balance amount is used in preparing the financial statements.
D. Financial statements should be prepared directly from information in the unadjusted trial
balance.
E. Financial statements can be prepared directly from information in the adjusted trial
balance.
156. Match the following terms the appropriate definition.
A. Accrual basis accounting
B. Cash basis accounting
C. Prepaid expenses
D. Profit margin
E. Depreciation expense
F. Straight-line depreciation
G. Time period principle
H. Matching principle
I. Accrued revenues
____ 1. Items paid for in advance of receiving their benefits.
____ 2. Allocates equal amounts of an asset's cost (less any salvage value) to depreciation
expense during its useful life.
____ 3. A principle that assumes that an organization's activities can be divided into specific
time periods such as months, quarters, or years.
____ 4. The principle that requires expenses to be reported in the same period as the revenues
that were earned as a result of the expenses.
____ 5. The accounting system that recognizes revenues when earned and expenses when
incurred.
____ 6. The expense created by allocating the cost of plant and equipment to the periods in
which they are used.
____ 7. Revenues earned in a period that are both unrecorded and not yet received in cash or
other assets.
____ 8. The accounting system where revenues are recognized when cash is received and
expenses are recorded when cash is paid.
____ 9. Net income divided by net sales.
157. Match the following terms with the appropriate definition.
A. Account form balance sheet
B. Adjusting entry
C. Unadjusted trial balance
D. Fiscal year
E. Report form balance sheet
F. Accounting period
G. Contra account
H. Interim financial reports
I. Adjusted trial balance
J. Natural business year
____ 1. A 12-month period that ends when a company's sales activities are at their lowest
point.
____ 2. A journal entry used at the end of an accounting period to bring an asset or liability
account balance to its proper amount and update the related expense or revenue account.
____ 3. An account linked with another account and having an opposite normal balance.
____ 4. The consecutive 12 months (or 52 weeks) selected as the organization's annual
accounting period.
____ 5. The length of time covered by financial statements.
____ 6. A listing of accounts and balances prepared after adjustments are recorded and posted
to the ledger.
____ 7. A balance sheet that lists items vertically in the order: assets, liabilities and equity.
____ 8. A balance sheet that lists assets on the left side and liabilities and equity on the right.
____ 9. A listing of accounts and balances prepared before adjustments are recorded.
____ 10. Financial reports covering less than one year, usually one, three, or six-month
periods.
1. J; 2. B; 3. G; 4. D; 5. F; 6. I; 7. E; 8. A; 9. C; 10. H
