Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings
42. Which of the following doesn’t correctly describe a journal entry which debits supplies
expense and credits supplies?
43. Which of the following doesn’t correctly describe a journal entry which debits
depreciation expense and credits accumulated depreciation?
Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings
44. Which of the following correctly describes the effects of accruing income tax expense at
year-end?
45. Which of the following correctly describes the effects of recording deferred revenues
when cash is received from a customer?
Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings
46. Which of the following correctly describes the effects of recording prepaid insurance
when cash is paid to purchase an insurance policy?
47. Which of the following does not correctly describe the following journal entry?
Supplies
Cash
Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings
48. Which of the following does not correctly describe the following journal entry?
Salaries expense
Salaries payable
49. Which of the following does not correctly describe the following journal entry?
Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings
50. Which of the following correctly describes the following journal entry?
51. Which of the following does not correctly describe the following journal entry?
Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings
52. Which of the following correctly describes the following journal entry?
53. Which of the following correctly describes the following journal entry?
Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings
54. On January 1, 2011, the general ledger of Global Corporation included supplies inventory
of $1,000. During 2011, supplies purchases amounted to $5,000. A physical count of
inventory on hand at December 31, 2011 determined that the supplies inventory was $1,200.
How much is the 2011 supplies expense?
55. Which of the following journal entries was created as the result of an accrual?
Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings
56. Which of the following journal entries was not created as the result of an accrual?
57. Which of the following accounts was created as the result of an accrual for expenses?
Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings
58. Which of the following journal entries was created as the result of a deferral?
59. Which of the following journal entries was not created as the result of a deferral?
Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings
60. Which of the following accounts was created as the result of a deferral?
61. Which of the following transactions results in a decrease in both total assets and net
income?
Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings
62. Which of the following transactions results in an increase in liabilities and a decrease in
net income?
63. Which of the following transactions results in an increase in both net income and
stockholders’ equity?
Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings
64. Which of the following transactions does not create a deferral?
65. Which of the following is not an accrual?
Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings
66. What is the effect on the financial statements when a company fails to accrue salaries
expense at year-end?
67. What is the effect on the financial statements when a company fails to record depreciation
expense at year-end?
Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings
68. What is the effect on the financial statements when a company fails to adjust the prepaid
insurance account at year-end for insurance coverage which has expired?
69. What is the effect on the financial statements when a company fails to adjust the unearned
revenue account for revenues earned at year-end?
Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings
70. What is the effect on the financial statements when a company fails to accrue interest
expense at year-end?
71. What is the effect on the financial statements when a company fails to accrue revenue
earned at year-end?
Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings
72. On December 31, 2011, Krug Company reported pretax income of $120,000 prior to the
following adjusting entries:
• Depreciation expense was $31,000;
• Accrued service revenues totaled $29,000;
• Accrued expenses totaled $12,000;
• Expired insurance which was prepaid totaled $9,000;
• Rent revenue earned was $7,000; the rent was prepaid by the tenant and credited to
unearned rent revenue.
How much is Krug’s pretax income after adjusting entries?
Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings
73. On December 31, 2011, Krug Company reported total assets of $390,000 prior to the
following adjusting entries:
• Depreciation expense was $31,000;
• Accrued service revenues totaled $29,000;
• Accrued expenses totaled $12,000;
• Expired insurance which was prepaid totaled $9,000;
• Rent revenue earned was $7,000; the rent was prepaid by the tenant and credited to
unearned rent revenue.
How much are Krug’s total assets after adjusting entries?
Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings
74. On December 31, 2011, Krug Company reported total liabilities of $110,000 prior to the
following adjusting entries:
• Depreciation expense was $31,000;
• Accrued service revenues totaled $29,000;
• Accrued expenses totaled $12,000;
• Expired insurance which was prepaid totaled $9,000;
• Rent revenue earned was $7,000; the rent was prepaid by the tenant and credited to
unearned rent revenue.
How much are Krug’s total liabilities after adjusting entries?
Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings
75. On December 31, 2011, Krug Company reported stockholders’ equity of $280,000 prior to
the following adjusting entries:
• Depreciation expense was $31,000;
• Accrued service revenues totaled $29,000;
• Accrued expenses totaled $12,000;
• Expired insurance which was prepaid totaled $9,000;
• Rent revenue earned was $7,000; the rent was prepaid by the tenant and credited to
unearned rent revenue.
How much is Krug’s stockholders’ equity after adjusting entries?
Chapter 04 – Adjustments, Financial Statements, and the Quality of Earnings
76. On July 1, 2011, Goode Company borrowed $100,000. The company signed a note
payable with interest at 6 percent per year. The note and interest are due on December 31,
2011. On December 31, 2011, Goode paid $103,000 to settle the debt in full. Assuming no
accruals for interest have been made during the year, transaction analysis of the $103,000
cash payment on December 31, 2011 should reflect which of the following?