Question 1

Recording an adjusting journal entry to recognize depreciation would cause which of the following?

Accepted Answer

A)   An increase in liabilities and expenses, and a decrease in stockholders' equity.
B)   A decrease in assets and stockholders' equity, and an increase in expenses.
C)   A decrease in assets, an increase in liabilities, and an increase in expenses.
D)   An increase in assets, an increase in liabilities, and a decrease in expensesE) B) and C)
F) A) and C)

Question 2

In a trial balance a contra-account appears:

Accepted Answer

A)   just before the account it offsets but in the opposite column.
B)   just after the account it offsets and in the same column.
C)   just after the account it offsets but in the opposite column.
D)   just before the account it offsets and in the same column.E) A) and D)
F) B) and C)

Question 3

Two-fifths (40%)  of the amount recorded as unearned revenue was earned as of 12/31/10. The adjusting entry would include

Accepted Answer

A)   a credit to service revenue for $3,000.
B)   a credit to unearned revenue for $3,000.
C)   a credit to service revenue for $2,000.
D)   a credit to unearned revenue for $2,000.E) B) and C)
F) A) and B)

Question 4

A company pays wages every two weeks. Wages amount to $100 a day. On March 31, the company pays wages for the two weeks ending March 24. At the end of the month, the related adjusting journal entry will include a

Accepted Answer

A)   debit to Wages Payable for $700 and a credit to Cash for $700.
B)   debit to Wage Expense for $700 and a credit to Wages Payable for $700.
C)   debit to Wages Payable for $700 and a credit to Wages Expense for $700.
D)   debit to Retained Earnings for $700 and a credit to Wages Payable for $700.E) A) and D)
F) B) and C)

Question 5

What is the amount of net income (net loss)  for the year?

Accepted Answer

A)   ($2,000) 
B)   ($3,800) 
C)   ($1,600) 
D)   ($3,300) E) All of the above
F) A) and C)

Question 6

Which of the following statements regarding adjusting entries is not true?

Accepted Answer

A)   Adjustments are needed to ensure that the accounting system includes all of the revenues and expenses of the period.
B)   Adjustments help to ensure the related accounts on the balance sheet and income statement are up to date and complete.
C)   Adjusting entries often affect the cash account
D)   Adjusting entries always include one balance sheet and one income statement accountE) B) and D)
F) B) and C)

Question 7

Which of the following statements regarding timing issues associated with closing entries is true?

Accepted Answer

A)   Closing journal entries are recorded at the end of each reporting period which could be monthly, quarterly or annually.
B)   After closing entries are posted, the balances of the income statement accounts will be zero.
C)   Closing entries are made to zero out the balances of the permanent accounts on the balance sheet.
D)   After closing entries are posted, the only temporary account with a balance is the Dividends DeclaredE) A) and B)
F) A) and C)

Question 8

When the future benefits of existing assets are used up in the ordinary course of business:

Accepted Answer

A)   an expense is recorded.
B)   a loss is recorded.
C)   a credit to a liability is recorded.
D)   a debit to assets is recorded.E) A) and C)
F) B) and C)

Question 9

At the end of the year, accrual adjusting journal entries could include a:

Accepted Answer

A)   debit to an expense and a credit to an asset.
B)   credit to a revenue and a debit to an expense.
C)   debit to cash and a credit to contributed capital.
D)   debit to an expense and a credit to a liability.E) A) and D)
F) A) and C)

Question 10

An error is indicated if the following account appears on the post-closing trial balance with a positive balance.

Accepted Answer

A)   Office equipment
B)   Contributed capital
C)   Accumulated depreciation
D)   Depreciation expenseE) None of the above
F) All of the above

Question 11

Accumulated depreciation:

Accepted Answer

A)   is an expense account.
B)   is a liability account.
C)   is a regular asset account.
D)   is an asset contra-account.E) B) and C)
F) A) and B)

Question 12

A company declared and paid a dividend of $8,000 this year. The entry to close the dividend account at the end of the year is:

Accepted Answer

A)   Option A
B)   Option B
C)   Option C
D)   Option DE) None of the above
F) A) and D)

Question 13

The company uses up $5,000 of the book value of an existing asset. The company adjusts its accounts accordingly. Which of the following is a true statement?

Accepted Answer

A)   This is an accrual adjustment.
B)   This is a closing adjustment.
C)   This is a deferral adjustment.
D)   The adjustment should not have been made.E) None of the above
F) B) and C)

Question 14

Before closing entries are prepared, the retained earnings balance in the adjusted trial balance is equal to:

Accepted Answer

A)   the balance of retained earnings at the beginning of the year.
B)   the balance of retained earnings after adding revenues and subtracting expenses but before subtracting dividends.
C)   the balance of retained earnings at the end of the year.
D)   the balance of retained earnings at the beginning of the next year.E) None of the above
F) A) and B)

Question 15

Which of these accounts would normally not be affected by an adjustment?

Accepted Answer

A)   Supplies.
B)   Revenues.
C)   Expenses.
D)   Cash.E) None of the above
F) B) and D)

Question 16

Adjusting journal entries:

Accepted Answer

A)   affect only balance sheet accounts.
B)   affect only income statement accounts.
C)   affect only cash flow accounts.
D)   affect both income statement and balance sheet accounts.E) None of the above
F) B) and C)

Question 17

Which of the following statements regarding types of adjusting entries is true?

Accepted Answer

A)   An accrual adjustment that increases an asset will include an increase in an expense.
B)   A deferral adjustment that decreases an asset will include an increase in an expense.
C)   An accrual adjustment that increases an expense will include an increase in assets.
D)   A deferral adjustment that increases a contra account will include an increase in an assetE) B) and D)
F) All of the above

Question 18

Which of the following is not a term for the value at which an asset is reported on a financial statement?

Accepted Answer

A)   Carrying value.
B)   Book value.
C)   Net book value.
D)   Accrual valueE) B) and C)
F) None of the above

Question 19

Revenue and expense accounts are permanent accounts because they always appear on the income statement.

Accepted Answer

A) True 
 B)False

Question 20

Adjusting entries are not needed when assets are used up gradually over several accounting periods after being purchased.

Accepted Answer

A) True 
 B)False

Exam 4: Adjustments, Financial Statements, and Financial Results

A company pays wages every two weeks. Wages amount to $100 a day. On March 31, the company pays wages for the two weeks ending March 24. At the end of the month, the related adjusting journal entry will include a

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Adjusting journal entries:

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An error is indicated if the following account appears on the post-closing trial balance with a positive balance.

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Which of the following statements regarding timing issues associated with closing entries is true?

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Recording an adjusting journal entry to recognize depreciation would cause which of the following?

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At the end of the year, accrual adjusting journal entries could include a:

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Revenue and expense accounts are permanent accounts because they always appear on the income statement.

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Accumulated depreciation:

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Which of the following is not a term for the value at which an asset is reported on a financial statement?

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What is the amount of net income (net loss) for the year?

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Which of the following statements regarding adjusting entries is not true?

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Two-fifths (40%) of the amount recorded as unearned revenue was earned as of 12/31/10. The adjusting entry would include

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Adjusting entries are not needed when assets are used up gradually over several accounting periods after being purchased.

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When the future benefits of existing assets are used up in the ordinary course of business:

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The company uses up $5,000 of the book value of an existing asset. The company adjusts its accounts accordingly. Which of the following is a true statement?

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A company declared and paid a dividend of $8,000 this year. The entry to close the dividend account at the end of the year is:

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Which of the following statements regarding types of adjusting entries is true?

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Before closing entries are prepared, the retained earnings balance in the adjusted trial balance is equal to:

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In a trial balance a contra-account appears:

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Which of these accounts would normally not be affected by an adjustment?

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