108) Making rent payments in advance is an example of a(n):
A) Accrued revenue.
B) Accrued expense.
C) Deferred revenue.
D) Prepaid expense.
109) A gym offers one-year memberships for $99 and requires customers to pay the full amount
of cash at the beginning of the membership period. For the gym, this is an example of a(n):
A) Accrued expense.
B) Accrued revenue.
C) Prepaid expense.
D) Deferred revenue.
110) Receiving a utility bill for costs in the current period but delaying payment until the
following period is an example of a(n):
A) Accrued expense.
B) Accrued revenue.
C) Prepaid expense.
D) Deferred revenue.
111) Providing goods or services to customers on account is an example of a(n):
A) Accrued expense.
B) Accrued revenue.
C) Prepaid expense.
D) Deferred revenue.
112) An example of an adjusting entry would not include:
A) Recording interest earned on bank account balances.
B) Recording the expiration of prepaid rent.
C) Recording unpaid salaries.
D) Recording the purchase of office supplies.
113) The adjusting entry required when goods and services are provided to customer for amounts
previously recorded as deferred revenues includes:
A) A debit to a liability.
B) A debit to an asset.
C) A credit to a liability.
D) A credit to an asset.
114) The adjusting entry required to record accrued expenses includes:
A) A credit to Cash.
B) A debit to an asset.
C) A credit to an asset.
D) A credit to liability.
115) Adjusting entries:
A) Often include the Cash account.
B) Usually are recorded at the beginning of the accounting period.
C) Always involve at least one income statement account and one balance sheet account.
D) Adjust the balance of revenue and expense accounts to zero.
116) On July 1, 2021, Charlie Co. paid $18,000 to Rent-An-Office for rent covering 18 months
from July 2021 through December 2022. What adjusting entry should Charlie Co. record on
December 31, 2021?
A) Debit Rent Expense and credit Cash for $18,000.
B) Debit Rent Expense and credit Prepaid Rent for $18,000.
C) Debit Prepaid Rent and credit Rent Expense for $6,000.
D) Debit Rent Expense and credit Prepaid Rent for $6,000.
117) Allen Inc. took out a one-year, 8%, $100,000 loan on March 31, 2021. Interest is due upon
maturity of the loan. What adjusting entry, if any, should Allen Inc. record on December 31,
2021?
A) Debit Interest Expense and credit Interest Payable for $6,000.
B) Debit Interest Expense and credit Interest Payable for $2,000.
C) No adjusting entry is necessary.
D) Debit Interest Expense and credit Interest Payable for $8,000.
118) On May 1, 2021, Townsley borrowed $250,000 from Prime Bank by signing a three-year,
6% note payable. Interest is due each May 1. What adjusting entry, if any, should Townsley
record on December 31, 2021?
A) Debit Interest Expense and credit Interest Payable for $5,000.
B) Debit Interest Expense and credit Interest Payable for $10,000.
C) Debit Interest Expense and credit Interest Payable for $15,000.
D) No adjusting entry is necessary.
119) On May 1, 2021, Townsley borrowed $250,000 from Prime Bank by signing a three-year,
6% note payable. Interest is due each May 1. What adjusting entry, if any, should Prime Bank
record on December 31, 2021?
A) Debit Interest Receivable and credit Interest Revenue for $5,000.
B) Debit Interest Receivable and credit Interest Revenue for $10,000.
C) Debit Interest Receivable and credit Interest Revenue for $15,000.
D) No adjusting entry is necessary.
120) Which of the following is a possible adjusting entry?
A) Debit Cash, credit Accounts Payable.
B) Debit Service Revenue, credit Cash.
C) Debit Salaries Expense, credit Salaries Payable.
D) Debit Utilities Expense, credit Retained Earnings.
121) When a company makes an end-of-period adjusting entry that includes a credit to Prepaid
Rent, the debit is usually made to:
A) Cash.
B) Rent Expense.
C) Rent Payable.
D) Rent Receivable.
122) When a company makes an end-of-period adjusting entry, which includes a debit to
Supplies Expense, the usual credit entry is made to:
A) Accounts Payable.
B) Supplies.
C) Cash.
D) Retained Earnings.
123) Which of the following would not typically be used as an adjusting entry?
A) Debit Rent Expense and credit Prepaid Rent.
B) Debit Cash and credit Deferred Revenue.
C) Debit Interest Expense and credit Interest Payable.
D) Debit Deferred Revenue and credit Service Revenue.
124) Yummy Foods purchased a one-year hazard insurance policy on August 1 and recorded the
$4,200 premium to prepaid insurance. At its December 31 year-end, Yummy Foods would
record which of the following adjusting entries?
A) Debit Insurance Expense and credit Prepaid Insurance for $1,750.
B) Debit Prepaid Insurance and credit Insurance Expense for $1,750.
C) Debit Insurance Expense and credit Accounts Payable for $4,200.
D) Debit Insurance Expense and credit Prepaid Insurance for $2,450.
125) At the beginning of the year, a company had a balance in its prepaid insurance account of
$48,400. During the year, $86,000 was paid for insurance. At the end of the year, after adjusting
entries were recorded, the balance in the prepaid insurance account was $42,000. Insurance
expense for the year would be:
A) $92,400.
B) $86,000.
C) $134,400.
D) $6,400.
126) A company purchased $270,000 in supplies during the year. The supplies account increased
by $10,000 during the year to an ending balance of $66,000. For what amount was the adjusting
entry to supplies expense?
A) $300,000.
B) $280,000.
C) $260,000.
D) $240,000.
127) A company receives a utility bill each month for services received. The company’s policy is
to pay the utility bill within 30 days of receipt. On December 31, 2021, the company receives a
utility bill of $4,200 for the month of December and plans to pay the bill by January 30, 2022.
What adjusting entry, if any, will the company record on December 31, 2021?
A) Debit Utilities Expense and credit Cash for $4,200.
B) Debit Utilities Expense and credit Utilities Payable for $4,200.
C) Debit Utilities Payable and credit Utilities Expense for $4,200.
D) No adjusting entry is necessary at the end of the year.
128) A company owes employee salaries of $16,000 at the end of the year. These salaries will be
paid in the following year. What adjusting entry, if any, does the company need to record at the
end of the year?
A) Debit Salaries Expense and credit Cash for $16,000.
B) Debit Salaries Expense and credit Salaries Payable for $16,000.
C) Debit Salaries Payable and credit Salaries Expense for $16,000.
D) No adjusting entry is necessary at the end of the year.
129) The employees of Neat Clothes work Monday through Friday. Every other Friday the
company issues payroll checks totaling $32,000 (or $3,200 per weekday). The current pay period
ends on Friday, January 3. Neat Clothes is now preparing financial statements for the year ended
December 31. What is the adjusting entry to record accrued salaries at the end of the year?
A) Debit Salaries Payable and credit Salaries Expense for $22,400.
B) Debit Salaries Expense and credit Salaries Payable for $6,400.
C) Debit Salaries Expense and credit Salaries Payable for $9,600.
D) Debit Salaries Expense and credit Salaries Payable for $22,400.
130) A company has a policy of paying salaries for contract labor on the 15th of the month
following the labor services received. In December 2021, the company recorded $15,000 paid in
salaries for labor services received in November 2021. In addition, labor services received in
December 2021 were $12,000 and will be paid by the company on January 15, 2022. What
adjusting entry will the company record on December 31, 2021?
A) Debit Salaries Expense and credit Salaries Payable for $27,000.
B) Debit Salaries Expense and credit Cash for $15,000.
C) Debit Salaries Expense and credit Salaries Payable for $12,000.
D) Debit Salaries Expense and credit Salaries Payable for $3,000.
131) PrimeFlix sells one-year online subscriptions for viewing classic movies. Customers are
required to pay for the subscription at the beginning of the subscription period. On April 1, 2021,
total sales of one-year subscriptions are $12,000. What adjusting entry does PrimeFlix need to
record on December 31, 2021?
A) Debit Deferred Revenue and credit Service Revenue for $9,000.
B) Debit Deferred Revenue and credit Service Revenue for $12,000.
C) Debit Service Revenue and credit Deferred Revenue for $9,000.
D) Debit Service Revenue and credit Deferred Revenue for $12,000.
132) On September 1, 2021, Gold Gaming sold 400 one-year subscriptions to its online gaming
website for $90 each. The total amount received was credited to Deferred Revenue. What would
be the required adjusting entry at December 31, 2021?
A) Debit Deferred Revenue and credit Service Revenue for $36,000.
B) Debit Service Revenue and credit Deferred Revenue for $24,000.
C) Debit Deferred Revenue and credit Service Revenue for $24,000.
D) Debit Deferred Revenue and credit Service Revenue for $12,000.
133) During the year, Cheng Company paid salaries of $24,000. In addition, $8,000 in salaries
has accrued by the end of the year but has not been paid. The year-end adjusting entry would
include which one of the following?
A) Debit to Salaries Expense for $32,000.
B) Credit to Salaries Expense of $8,000.
C) Debit to Salaries Payable for $24,000.
D) Credit to Salaries Payable for $8,000.
134) At the beginning of December, Global Corporation had $2,000 in supplies on hand. During
the month, supplies purchased amounted to $3,000, but by the end of the month the supplies
balance was only $800. What is the appropriate month-end adjusting entry?
A) Debit Cash $4,200, credit Supplies $4,200.
B) Debit Supplies $4,200, credit Supplies Expense $4,200.
C) Debit Supplies Expense $4,200, credit Supplies $4,200.
D) Debit Cash $800, credit Supplies $800.
135) On October 1, 2021, a company purchases equipment for $72,000. The equipment is
expected to be used for the next four years (48 months). What adjusting entry should the
company record on December 31, 2021?
A) Debit Depreciation Expense and credit Cash for $72,000.
B) Debit Depreciation Expense and credit Accumulated Depreciation for $72,000.
C) Debit Equipment and credit Depreciation Expense for $4,500.
D) Debit Depreciation Expense and credit Accumulated Depreciation for $4,500.
136) On October 1, 2021, a company purchases equipment for $72,000. The equipment is
expected to be used for the next four years (48 months). What adjusting entry should the
company record on December 31, 2022?
A) Debit Depreciation Expense and credit Accumulated Depreciation for $13,500.
B) Debit Depreciation Expense and credit Accumulated Depreciation for $18,000.
C) Debit Depreciation Expense and credit Accumulated Depreciation for $22,500.
D) Debit Depreciation Expense and credit Accumulated Depreciation for $4,500.
137) On November 1, 2021, a company signs a one-year contract to provide services. The
agreement specifies payments of $4,500 to be received every three months for a total of $18,000
over the entire year ($1,500 per month). No entry is made on November 1, 2021, at the time the
contract is signed. What adjusting entry does the company need to record at the end of the year?
A) Debit Accounts Receivable and credit Service Revenue for $15,000.
B) Debit Service Revenue and credit Accounts Receivable for $12,000.
C) Debit Accounts Receivable and credit Service Revenue for $3,000.
D) Debit Accounts Receivable and credit Service Revenue for $18,000.
138) A company provides maintenance services to customers. The company’s policy is to
provide services and then bill customers on the 10th of the following month. In December 2021,
the company provided services of $14,000 and plans to bill customers on January 10, 2022. What
adjusting entry, if any, will the company record on December 31, 2021?
A) Debit Accounts Receivable and credit Deferred Revenue for $14,000.
B) Debit Accounts Receivable and credit Service Revenue for $14,000.
C) Debit Service Revenue and credit Accounts Receivable for $14,000.
D) No adjusting entry is necessary at the end of the year.
139) Prior to adjusting entries, Prepaid Rent had a balance of $8,300. The following year-end
adjusting entry was made by the company:
Rent Expense
6,800
Prepaid Rent
6,800
What balance would be shown for Prepaid Rent in the adjusted trial balance?
A) $1,500.
B) $6,800.
C) $8,300.
D) $15,100.
140) Prior to adjusting entries, Salaries Expense had a balance of $22,300. The following year-
end adjusting entry was made by the company:
Salaries Expense
4,400
Salaries Payable
4,400
What balance would be shown for Salaries Expense in the adjusted trial balance?
A) $4,400.
B) $17,900.
C) $22,300.
D) $26,700.
141) On November 1, $4,800 of rent on equipment for the next six months was paid and charged
to Prepaid Rent. At the end of the year, the financial statements would report:
A) Rent Expense, $4,800; Prepaid Rent $0.
B) Rent Expense, $1,600; Prepaid Rent $3,200.
C) Rent Expense, $1,600; Prepaid Rent $4,800.
D) Rent Expense, $3,200; Prepaid Rent $1,600.
142) Eve’s Apples opened for business on January 1, 2021, and paid for two insurance policies
effective that date. The liability policy was $36,000 for 18 months, and the crop damage policy
was $12,000 for a two-year term. What was the balance in Eve’s Prepaid Insurance account as of
December 31, 2021?
A) $9,000.
B) $18,000.
C) $30,000.
D) $48,000.
143) PrimeFlix sells one-year online subscriptions for viewing classic movies. Customers are
required to pay for the subscription at the beginning of the subscription period. On April 1, 2021,
total sales of one-year subscriptions are $12,000. What is the adjusted balance of Deferred
Revenue on December 31, 2021?
A) $9,000.
B) $3,000.
C) $0.
D) $12,000.
144) A list of all accounts and their balances after updating account balances for adjusting entries
is referred to as:
A) A trial balance.
B) An adjusted trial balance.
C) A post-closing trial balance.
D) An accounting trial balance.
145) An adjusted trial balance:
A) Is a list of all accounts and their balances after adjusting entries.
B) Is a list of all accounts and their balances before adjusting entries.
C) Is a list of all accounts and their balances after closing entries.
D) Is a trial balance adjusted for cash-basis accounting.
146) Consider the adjustment process at the end of the accounting period.
1. Record the adjusting entries in the journal.
2. Prepare an adjusted trial balance to check the equality of the debits and credits.
3. Determine the accounts requiring adjustment, using the unadjusted trial balance.
4. Post the adjusting entries to the general ledger.
Place the actions above in the proper order.
A) 1, 4, 3, 2.
B) 1, 2, 4, 3.
C) 3, 4, 2, 1.
D) 3, 1, 4, 2.
147) The adjusted trial balance should be prepared ________ the financial statements are
prepared in order to prove the ________ of the debits and credits.
A) after; equality
B) before; accuracy
C) before; equality
D) after; accuracy
148) Which of the following trial balances shows account balances that incorporate current year
deferrals and accruals?
A) Adjusted trial balance.
B) Final trial balance.
C) Unadjusted trial balance.
D) Cash-basis trial balance.
149) A company’s accountant is trying to prepare an adjusted trial balance from the list of
accounts below.
Cash
$
Retained Earnings
Prepaid Rent
Salaries Expense
Equipment
Service Revenue
Miscellaneous Expense
Supplies
Dividends
Accounts Payable
Common Stock
What is the total amount of debits?
A) $114,000.
B) $86,000.
C) $81,000.
D) $11,000.
150) A company’s accountant is trying to prepare an adjusted trial balance from the list of
accounts below.
Cash
$
Retained Earnings
Prepaid Rent
Salaries Expense
Equipment
Service Revenue
Miscellaneous Expense
Supplies
Dividends
Accounts Payable
Common Stock
What is the total amount of credits?
A) $111,000.
B) $81,000.
C) $114,000.
D) $86,000.
151) Which of the following is true about an income statement?
A) It reports activity for a period of time.
B) It does not include dividends paid.
C) It reports revenues and expenses.
D) All of the other answers are true.
152) Which of the following best describes the information reported in the income statement?
A) The portion of profits paid in cash to stockholders.
B) The current resources available to pay current obligations.
C) The amount recognized from providing goods and services to customers compared to the cost
of doing so.
D) The extent to which cash inflows exceed cash outflows.
153) The following table contains financial information for Trumpeter Inc. before closing
entries:
Cash
$
12,000
Supplies
4,500
Prepaid Rent
2,000
Salaries Expense
4,500
Equipment
65,000
Service Revenue
30,000
Miscellaneous Expense
20,000
Dividends
3,000
Accounts Payable
5,000
Common Stock
68,000
Retained Earnings
8,000
What is Trumpeter’s net income?
A) $3,500.
B) $2,500.
C) $5,000.
D) $5,500.