College Accounting, 14e (Slater)
Chapter 4 The Accounting Cycle Continued
4.1 Learning Objective 4-1
1) A form used to organize and check data before preparing financial reports is known as a(n):
A) trial balance.
B) income statement.
C) ledger.
D) worksheet.
2) Bringing account balances up to date before preparing financial reports is called:
A) posting.
B) adjusting.
C) journalizing.
D) closing.
3) An adjustment for Prepaid Rent Expense would indicate:
A) the amount originally paid.
B) the amount expired.
C) the amount of the ending balance.
D) the amount of the beginning balance.
4) If the balance of supplies at the start of the month was $1,700 and at the end of the month you had $850
on hand, the adjustment for Supplies would be:
A) $850.
B) $950.
C) $750.
D) $1,700.
5) The adjustment to record supplies used during the period would be:
A) debit Supplies; credit Supplies Expense.
B) debit Supplies Expense; credit Cash.
C) debit Supplies Expense; credit Supplies.
D) debit Supplies; credit Cash.
6) A contra-asset is:
A) a liability.
B) an asset with a debit balance.
C) an account with an opposite balance of a normal asset.
D) a revenue account.
7) If the adjustment for Supplies used during the period was NOT made:
A) expenses would be too low.
B) assets would be too low.
C) expenses would be too high.
D) revenue would be too low.
8) NOT recording the Prepaid Rent Expense used causes:
A) assets to be too low.
B) liabilities to be too high.
C) expenses to be too low.
D) revenue to be too low.
9) Prepaid Rent Expense is considered to be a(n):
A) liability.
B) asset.
C) contra-asset.
D) contra-revenue.
10) As Prepaid Rent Expense is used, the asset becomes a(n):
A) liability.
B) expense.
C) contra-asset.
D) contra-revenue.
11) If Prepaid Rent Expense for the period is NOT adjusted:
A) assets will be overstated and expenses will be overstated.
B) assets will be overstated and expenses will be understated.
C) assets will be understated and expenses will be overstated.
D) revenue will be understated and expenses will be understated.
12) If the Supplies account is NOT adjusted:
A) assets will be overstated and expenses will be understated.
B) assets will be overstated and expenses will be overstated.
C) assets will be understated and expenses will be overstated.
D) assets will be understated and expenses will be understated.
13) When historical cost is used to record equipment, it would appear as the:
A) original cost in an asset account on the balance sheet.
B) residual value in the Stockholders Equity account.
C) residual value in an asset account on the balance sheet.
D) original cost on the income statement.
14) When original cost is used in the accounting records, the book value of the asset is:
A) the original cost.
B) the market value.
C) original cost less accumulated depreciation.
D) closed out.
15) The cost of an asset less accumulated depreciation equals:
A) residual value.
B) original cost.
C) depreciation expense.
D) depreciable value.
16) After the adjustment for depreciation has been made, the original cost of the equipment:
A) increases with a credit.
B) decreases with a debit.
C) remains the same.
D) is transferred to a liability.
17) The adjustment that is made to allocate the cost of a building over its expected life is called:
A) depreciation expense.
B) residual value.
C) accumulated depreciation.
D) None of the above answers are correct.
18) Bob purchased a truck for $53,000 with a residual value of $26,000 and a life expectancy of 5 years;
using straight-line depreciation, the amount of the depreciation adjustment for the first year would be:
A) $10,600.
B) $5,400.
C) $5,200.
D) $5,300.
19) Which of the following would be an example of a contra-asset?
A) Depreciation Expense
B) Unearned Revenue
C) Accumulated Depreciation
D) Discount on Bonds
20) Residual value is the:
A) estimated value of the asset when it is purchased.
B) estimated value of the asset at the end of its useful life.
C) cost of the asset.
D) same as book value.
21) The estimated value of an item at the end of its useful life is:
A) depreciation expense.
B) residual value.
C) accumulated depreciation.
D) book value.
22) As accumulated depreciation is recorded, the net book value:
A) increases.
B) decreases.
C) remains the same.
D) equals zero.
23) To record accrued salaries, you would:
A) debit Cash and credit Salaries Payable.
B) debit Salaries Payable and credit Salaries Expense.
C) debit Salaries Expense and credit Salaries Payable.
D) debit Salaries Expense and credit Cash.
24) What type of account is Salaries Payable?
A) Asset
B) Contra-Asset
C) Liability
D) Revenue
25) Unlimited Doors showed supplies available during the year of $2,300. A count of the supplies on
hand as of October 31 is $1,200. The adjusting entry for Store Supplies would include:
A) a debit to Store Supplies Expense for $1,200.
B) a credit to Store Supplies Expense for $1,200.
C) a debit to Store Supplies for $1,100.
D) a debit to Store Supplies Expense for $1,100.
26) Alcatraz Boat Tours showed store supplies available during the year, $800. If at the end of the month
supplies used were $100, the adjusting entry would include a:
A) debit to Supplies Expense for $100.
B) debit to Supplies Expense for $700.
C) credit to Supplies Expense for $100.
D) credit to Supplies Expense for $700.
27) Larry’s Snowboards estimated depreciation for office equipment at $750. The adjusting entry to record
the depreciation would include:
A) a debit to Office Equipment for $750.
B) a credit to Depreciation Expense for $750.
C) a credit to Accumulated Depreciation for $750.
D) a credit to Office Equipment for $750.
28) Simpson Golf Academy estimated depreciation on its building at $1,300. The adjusting entry for
depreciation of the building would include:
A) a debit to Building for $1,300.
B) a debit to Depreciation Expense for $1,300.
C) a credit to Building for $1,300.
D) a credit to Depreciation Expense for $1,300.
29) Sam purchased a four-year insurance policy for $7,200. The adjusting entry for one month would
include a:
A) debit to Insurance Expense, $150.
B) credit to Cash, $150.
C) debit to Prepaid Insurance, $150.
D) credit to Insurance expense, $150.
30) Sally’s Spices accrued and unpaid wages are $2,000. Which of the following is the required adjusting
entry?
A) Debit Salaries Expense, $2,000; credit Salaries Payable, $2,000
B) Credit Salaries Expense, $2,000; debit Salaries Payable, $2,000
C) Debit Cash, $2,000; credit Salaries Expense, $2,000
D) Debit Salaries Payable, $2,000; credit Cash, $2,000
31) Total wages per week are $4,000. You need to accrue $5,800 of wages. The adjusting entry would
include which of the following?
A) Credit Wages Expense, $5,800; debit Wages Payable, $5,800
B) Debit Wages Expense, $5,800; credit Wages Payable, $5,800
C) Debit Wages Expense, $4,000; credit Wages Payable, $4,000
D) Debit Wages Expense, $4,000; credit Cash, $4,000
32) On November 1, Duane paid $18,000 in advance for a year’s rent. The November 30 adjusting entry
for rent expense should include a:
A) debit Rent Expense, $18,000.
B) credit Prepaid Rent Expense, $18,000.
C) debit Rent Expense, $1,500.
D) credit Cash, $1,500.
33) The adjusted trial balance on the worksheet shows Accumulated Depreciation, $2,000, and
Depreciation Expense, $400. What was the balance in the Accumulated Depreciation account before the
adjustment?
A) $2,400
B) $1,600
C) $400
D) $2,000
34) Great Plains Modeling Agency purchased $1,700 of office furniture at the beginning of the month.
Depreciation Expense at the end of the month is $200. What is the balance of the Office Furniture account
at the end of the month?
A) $750
B) $1,900
C) $200
D) $1,700
35) The adjustment for wages earned, but not yet paid is:
A) Debit Wages Expense, credit Cash.
B) Debit Wages Payable, credit Wages Expense.
C) Debit Wages Payable, credit Cash.
D) Debit Wages Expense, credit Wages Payable.
36) Which of the following accounts would most likely NOT need to be adjusted at the end of the year?
A) Office Supplies
B) Salaries Payable
C) Accumulated Depreciation
D) Cash
37) Equipment with a cost of $590,000 has an accumulated depreciation of $350,000. What is the book
value of the equipment?
A) $306,250
B) $43,750
C) $240,000
D) $120,000
38) Equipment with a cost of $152,000 has an accumulated depreciation of $59,000. What is the historical
cost of the equipment?
A) $152,000
B) $59,000
C) $211,000
D) $93,000
39) Bailey’s received its electric bill for December on December 31 but did not pay nor record it in the
general journal. This resulted in:
A) understated assets.
B) overstated net income.
C) overstated liabilities.
D) understated net income.
40) Online Service received its telephone bill for January, but is not going to pay the bill until February.
What adjustment is needed to record the transaction?
A) Debit Telephone Expense; credit Cash
B) Debit Accounts Payable; credit Telephone Expense
C) Debit Telephone Expense; credit Accounts Payable
D) Debit Accounts Payable; credit Cash
41) Which of the following is most likely to result in an adjusting entry at the end of the period?
A) Payment of two months’ insurance in advance
B) Payment of one month’s rent
C) Owner’s withdrawals
D) Owner’s investment
42) Assuming no investments were made during the period, the balance of Capital shown on the
worksheet is:
A) beginning capital.
B) ending capital.
C) net income.
D) equal to owner’s withdrawals.
43) Adjusting entries affect:
A) the balance sheet.
B) the income statement.
C) the cash account.
D) Both A and B are correct.
44) Which of the following transactions would result in an accrual?
A) Salary expense has been incurred but unpaid.
B) Rent expired for the month.
C) Supplies used during the accounting period.
D) Owner’s withdrawals.
45) The adjustment for depreciation was credited to Equipment and debited to Depreciation Expense.
This would:
A) overstate the assets.
B) understate the assets.
C) overstate net income.
D) None of these is correct.
46) Which of the following accounts would most likely be depreciated?
A) Equipment
B) Office Supplies
C) Investments
D) Prepaid Rent Expense
47) When making the adjustment for prepaid insurance, instead of writing off only the time that has
passed, the entire policy was written off. This would:
A) overstate the assets.
B) overstate the liabilities.
C) understate net income.
D) understate expenses.
48) The adjustment for accrued wages included the entire pay period, some of which occurs next month.
This would:
A) understate the liabilities.
B) overstate the liabilities.
C) overstate net income.
D) None of these is correct.
49) Historical cost is the same as:
A) residual value.
B) original cost.
C) depreciable value.
D) salvage value.
50) The accrual of an expense was not recorded. This would:
A) overstate assets and overstate liabilities.
B) overstate expenses and understate liabilities.
C) understate expenses and overstate liabilities.
D) understate expenses and understate liabilities.
51) Depreciation of equipment was recorded twice this period. This would:
A) overstate expenses and overstate assets.
B) overstate expenses and understate assets.
C) understate expenses and overstate assets.
D) understate assets and understate assets.
52) Adjusting the Supplies account will:
A) decrease the total assets and increase the total expenses.
B) decrease the total assets and decrease the total expenses.
C) increase the total assets and increase the total expenses.
D) increase the total assets and decrease the total expenses.
53) It’s the end of the accounting period and no electric bill has been received (but the expense has been
incurred); you should record an entry that:
A) increases the total revenue and increases the total expenses.
B) decreases the total assets and increases the total expenses.
C) increases the total liabilities and increases the total expenses.
D) decreases the total liabilities and increases the total expenses.
54) The entry to record the expiration of part of the Prepaid Rent Expense will:
A) decrease total liabilities and increase total expenses at the end of the month.
B) decrease total assets and decrease total expenses at the end of the month.
C) decrease total assets and increase total expenses at the end of the month.
D) increase total revenue and decrease total expenses at the end of the month.
55) The depreciation of equipment will require an adjustment that results in:
A) total assets and total expenses increasing.
B) total assets increasing and total expenses decreasing.
C) total assets and revenue decreasing.
D) total assets decreasing and total expenses increasing.
56) Which of the following would cause a liability to be credited and an expense to be debited?
A) Recording the adjustment for the expiration of rent
B) Recording the depreciation of equipment
C) Recording the accrual of salaries incurred
D) Purchasing equipment
57) Which of the following would cause a contra-asset to be credited and an expense debited?
A) Recording an accrued expense
B) Recording the consumption of supplies
C) Recording the building depreciation
D) All of the above would have that effect.
58) Which of the following would cause total assets to decrease and total expenses to increase?
A) Recording the depreciation of equipment
B) Recording the consumption of supplies
C) Recording the expiration of Prepaid Rent Expense
D) All of the above would have that effect.
59) It is the year end, but not the pay period end. How will this affect the balance sheet?
A) Assets will be decreased.
B) Liabilities will be increased.
C) Owner’s equity will be increased.
D) Net Income will be increased.
60) At the start of this year 18 months of rent was paid. At the year’s end, how will this affect the balance
sheet?
A) Assets will be decreased.
B) Liabilities will be increased.
C) Owner’s Equity will be increased.
D) Net Income will be increased.
61) The Sarbanes-Oxley Act:
A) requires a minimum cash balance.
B) does not allow adjusting entries.
C) states the need to have accurate financial reports.
D) does not allow the use of a worksheet.
62) The worksheet is a formal financial statement.
63) Adjustments are necessary to update account balances for internal transactions.
64) An important function of the worksheet is for the accountant to find and correct errors before the
financial statements are prepared.
65) The accounts added below the trial balance, on the worksheet, are always increasing.
66) Original cost of equipment is adjusted at the end of the accounting period.
67) Accumulated Depreciation is a contra-asset account found on the income statement.
68) The amount of supplies used during the period would be shown in the adjustment columns of the
worksheet.
69) When an asset expires or is used up, it becomes revenue.
70) If an adjustment to Supplies is not made, the balance in the Supplies account will be understated.
71) Rent expired at the end of an accounting period requires an adjustment.
72) The original cost of equipment is reduced by the amount of Depreciation Expense.
73) The spreading or allocating of the cost of a long-term asset is called discounting.
74) Accumulated Depreciation is a Liability account.
75) The worksheet contains a Depreciation Schedule of Assets.
76) Depreciation Expense is debited when recording the depreciation for the period.
77) The use of straight-line depreciation results in equal amounts of depreciation being taken over a
period of time.
78) Prepaid Rent Expense is a contra-asset with a normal balance of a debit.
79) To compute net income or net loss, the debit and credit columns of the income statement section of
the worksheet are totaled, and the difference is placed on the smaller side.
80) Revenue is recorded only after cash is received, and expenses are recorded only when incurred.
81) The worksheet is the first financial statement prepared.
82) Equipment was purchased for $50,000, residual value is $2,000 and it is expected that the useful life is
10 years. What is the annual depreciation adjustment amount after the first year assuming straight-line
depreciation?
$ ________
83) Equipment was purchased for $50,000, residual value is $2,000 and it is expected that the useful life is
10 years. What is the book value of the equipment after the third year assuming straight-line
depreciation?
$ ________
84) Equipment was purchased for $50,000, residual value is $2,000 and it is expected that the useful life is
10 years. What is the amount in the Accumulated Depreciation account after 6 years assuming straight–
line depreciation?
$ ________
85) On January 1 the Prepaid Insurance account had a balance of $6,000 that represented 6 months’ worth
of advance payment. It is now the end of March and there have been no adjustments to the account
balance. Determine the amount of expense to record at the end of March.
$ ________