1.. Sun Glow Glass estimated depreciation for office equipment is $100. The adjusting entry would include: a. a credit to Accumulated Depreciation for $100. b. a credit to Depreciation Expense for $100. c. a debit to Accumulated Depreciation for $100 d. a credit to Office Equipment for $100. 2. Adjusting journal entries are prepared from a. source documents. b. the balance sheet. c. the income statement. d. the adjustment columns of the worksheet. 3. When the balance of the Income Summary account is a credit, the entry to close this account is: a. debit Capital, credit Income Summary. b. debit Income Summary, credit Revenue. c. debit Income Summary, credit Capital. d. debit Revenue, credit Income Summary. 4. Which of the following accounts would be considered a temporary account? a. Revenue. b. Assets. c. Liabilities. d. Owner's Equity.

5. Use the information below for the following question(s).

Moss County Bank agrees to lend the Blackwood Brick Company $100,000 on January 1. Blackwood Brick Company signs a $100,000, 6%, 9-month note.

3. What is the adjusting entry required if Blackwood Brick Company prepares financial statements on June 30?

a.	Interest Expense..........................................................................................................	3,000
	Interest Payable.................................................................................................		3,000
b.	Interest	Expense......................................................................................	3,000
	Cash	...................................		3,000
c.	Interest	Payable......................................................................................	3,000
	Cash	...................................		3,000
d.	Interest	Payable......................................................................................	3,000
	Interest Expense.................................................................................................		3,000

1. One of the accounting concepts upon which adjustments for prepayments and accruals are based is

1. matching
2. cost
3. monetary unit
4. economic entity

1. Javiers Tune-Up shop follows the revenue recognition principle.Javier services a car on August 31.The customer picks up the vehicle on September 1 and mails the payment to Javier on September 5. Javier receives the check in the mail on September 6. When should Javier show that the revenue was earned?

1. August 31
2. August 1
3. September 5
4. September 6

1. Adjusting Entries are

1. not necessary if the accounting system is operating properly.
2. Usually required before financial statements are prepared
3. Made whenever management desires to change an account balance
4. Made to balance sheet accounts only

1. If you failed to record revenue earned but not yet received which of the following would occur.

1. Assets would be understated
2. Assets would be overstated
3. No affect

1. If you failed to record depreciation which of the following would occur.

a. Assets would be understated

b. Assets would be overstated

c. No affect

Problem 1

(12 Points)

Use the following information to answer questions 1 - 6: A company borrowed $100,000 on December 1, 2007 by signing a six-month note that specifies interest at an annual percentage rate (APR) of 12%. No interest or principal payment is due until the note matures on May 31, 2008. The company prepares financial statements at the end of each calendar month. The following questions pertain to the adjusting entry that should be entered in the company's records.

1.	What date should be used to record the December adjusting entry?
2.	How many accounts are involved in the adjusting entry?
3.	What is the name of the account that will be debited?
4.	What is the name of the account that will be credited?
5.	What is the amount of the debit and the credit?
6.	What would be the effect on the financial statements if the company fails to make the adjusting entry on December 31, 2007?

Problem 2

(11 Points)

Instructions: List out all steps of the Accounting Cycle and describe each step.

Problem 3

(7 Points)

Indicate if the following accounts are temporary (T) or permanent (P).

Cash __________

Inventory __________

Unearned Revenue _________

Interest Revenue _________

Cost of Goods Sold ___________

Accumulated Depreciation ___________

Sales ____________