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please see atrtached file for what is it that i do need help in my homework MASTERING ADJUSTING ENTRIES TESTBANK Section 1WHY WE USE ACCRUALS,
please see atrtached file for what is it that i do need help in my homework
MASTERING ADJUSTING ENTRIES TESTBANK Section 1WHY WE USE ACCRUALS, DEFERRALS AND OTHER ADJUSTMENTS 1. In accrual accounting, an expense is recognized when it is: a. paid b. posted to the general ledger c. incurred d. either b or c 2. In cash basis accounting, an expense is recognized when it is: a. paid b. posted to the general ledger c. incurred d. either b or c 3. In accrual basis accounting, revenue is recognized when it is: a. received b. earned c. posted to the general ledger d. either b or c 4. In cash basis accounting, revenue is recognized when it is: a. received b. earned c. posted to the general ledger d. either b or c 5. On December 1, 20X1, your calendar year firm receives $12,000 in advance for work to be performed evenly over the next 12 months. Under the cash and accrual methods, respectively, this revenue will be reported on the 20X1 income statement as: a. b. c. d. 6. The two types of adjusting entries are: a. b. c. d. 7. $1,000 and $1,000 $12,000 and $12,000 $1,000 and $12,000 $12,000 and $1,000 cash and revenue debit and credit accrual and deferral deferral and prepayment Adjusting entries: a. b. Testbank never include a cash account are made when there have been prepayments during the year 1 Mastering Adjusting Entries c. d. may be necessary when revenue has been earned in one period but received in another all of the above American Institute of Professional Bookkeepers, 2010 Section 2ACCRUED REVENUE 1. Accrued revenue is: a. b. c. d. 2. The journal entry to accrue $500 commissions' revenue is: a. b. c. d. 3. b. c. d. 500 500 500 500 500 500 500 500 Interest Receivable Deferred Revenue Interest Receivable Deferred Revenue Interest Receivable Interest Revenue Interest Receivable Interest Revenue 500 500 1,200 1,200 1,200 1,200 500 500 As of year end, your firm was owed $4,000 for work completed, but had received only $1,500, that you debited to Revenue. By what amount must the balance in Revenue be adjusted at year end? a. b. c. d. 5. Cash Commissions Revenue Commissions Revenue Cash Commissions Revenue Accounts Receivable Accounts Receivable Commissions Revenue Several years ago, your calendar year company issued a $15,000 note at 8% a year interest due each July 31. If no interest is received this year, what journal entry do you record at year end? a. 4. payment received for work completed revenue earned but not received a debit to cash a credit to cash $4,000 $1,500 $2,500 $0 Your company performs work for a customer, but as of year end, has received no payment. If you do not record an adjusting entry at year end, how will the financial statements be affected? Testbank 2 Mastering Adjusting Entries a. b. c. d. Testbank Net income overstated overstated understated understated Assets not affected overstated not affected understated Liabilities understated not affected overstated not affected 3 Mastering Adjusting Entries Section 3ACCRUED EXPENSES (ACCRUED LIABILITIES) 1. Your company has a 5day workweek with a weekly payroll of $20,000 distributed each Friday. If an accounting period ends on a Tuesday, the adjusting journal entry is: a. b. c. d. 2. c. d. 4,000 8,000 8,000 8,000 8,000 4,000 4,000 no adjustment is required the company must record a journal entry that debits Utilities Expense and credits Utilities Expense Payable the company must record a journal entry that debits an asset account and credits an expense account none of the above Your company has a 5day workweek and a weekly payroll of $35,000 that it distributes each Friday. When an accounting period ends on a Thursday, which of the following entries will you record? a. b. c. d. 4. 4,000 If a company receives a December electric bill for $1,000 and decides to pay it in January: a. b. 3. Salary Expense Salary Payable Salary Expense Salary Payable Accrued Salary Salary Payable Deferred Salary Salary Payable Salary Payable Salary Expense Salary Expense Salary Payable Salary Payable Salary Expense Salary Expense Salary Payable 14,000 14,000 14,000 14,000 28,000 28,000 28,000 28,000 On November 1, your calendar year firm receives a $5,000 invoice for magazine ads that will run for the next 5 months. If you remit $1,000 on November 1 and debit Advertising Expense, then pay the remainder in January, which of the following entries will you record at year end? a. b. c. d. Testbank Advertising Expense Cash Advertising Expense Advertising Payable Advertising Expense Advertising Payable Advertising Expense Advertising Payable 1,000 1,000 2,000 2,000 1,000 1,000 5,000 5,000 4 Mastering Adjusting Entries 5. A company pays its employees every Friday. This year, the company's year ends on a Wednesday. If it does not to accrue salaries for the week, how will the financial statements be affected? a. b. c. d. 6. Assets not affected overstated not affected understated Liabilities understated not affected overstated not affected On August 1, your company takes a $10,000 note that requires your firm to repay principal and accrued interest of 8% a year at the end of 4 years. Which entry should you record at the end of this year? a. b. c. d. 7. Net income overstated overstated understated understated Interest Expense Cash Interest Expense Interest Payable Interest Expense Interest Payable Interest Expense Interest Payable 800 800 333 333 800 800 467 467 On November 1, 20X4, you record a $20,000 note receivable, debiting Cash and crediting Notes Payable. The note matures on May 1, 20X5 when principal and accrued interest of 6% a year is due. On December 31, 20X4, your adjusting entry for accrued interest will include: a. b. c. d. a debit to Interest Payable for $400 a debit to Interest Expense for $200 a credit to Interest Payable for $400 none of the above Section 4REVENUE COLLECTED IN ADVANCE (UNEARNED REVENUE) 1. A company collects payment in advance, debiting Cash and crediting Revenue. At year end, an adjusting entry: a. is not required if all the advance payment has been earned b. may need to debit Revenue c. may need to debit Unearned Revenue d. both a and b 2. On September 1, your calendar year company rents a machine to another firm for $24,000 a year. As of December 31, $17,000 has been received and recorded in Rent Revenue. What adjusting entry do you record at year end? a. b. Testbank Rent Revenue 9,000 Unearned Rent Revenue Rent Revenue 8,000 Unearned Rent Revenue 9,000 8,000 5 Mastering Adjusting Entries c. d. 3. b. c. d. b. c. d. 8,000 8,000 Rent Revenue Unearned Rent Revenue Unearned Rent Revenue Rent Revenue Unearned Rent Revenue Rent Revenue Rent Revenue Unearned Rent Revenue 8,000 8,000 7,000 7,000 8,000 8,000 7,000 7,000 Painting Revenue Cash Unearned Painting Revenue Cash Painting Revenue Unearned Painting Revenue Unearned Painting Revenue Painting Revenue 22,500 22,500 22,500 22,500 22,500 22,500 22,500 22,500 Your company receives a $75,000 advance for 1 year's rent that you record in Rent Received In Advance. If, at year end, 3 months have elapsed, what adjusting entry will you record? a. b. c. d. 6. 9,000 Your company receives a $40,000 advance for a $125,000 painting job and you credit Painting Revenue. If, at year end, 14% of the job has been completed, what adjusting entry will you record? a. 5. 9,000 On September 1, your calendar year company rents a machine to another firm for $24,000 a year. If, at year end, $15,000 has been received and recorded in Rent Revenue, what adjusting entry do you record at year end? a. 4. Rent Revenue Accounts Receivable Unearned Rent Revenue Rent Revenue Rent Revenue Rent Received in Advance Rent Revenue Rent Received in Advance Rent Received in Advance Rent Revenue Rent Received in Advance Rent Revenue 18,750 18,750 56.250 56.250 18,750 18,750 56,250 56,250 On October 11, your firm receives a $7,500 downpayment toward a $15,000 video your firm will produce, and you book it in Unearned Revenue. If, at year end, 20% of the work is completed, what adjusting entry will you record? a. Testbank Unearned Revenue 3,000 6 Mastering Adjusting Entries b. c. d. 7. 3,000 3,000 3,000 3,000 3,000 1,500 1,500 On April 1, a company takes on an 18month job and receives a $10,000 advance that is recorded in Revenue. If no adjusting entry is made at year end, how will the financial statements be affected? a. b. c. d. 8. Revenue Cash Revenue Revenue Unearned Revenue Unearned Revenue Revenue Net income overstated overstated understated understated Assets not affected overstated not affected understated Liabilities understated not affected overstated not affected On April 1, a company takes on an 18month job and receives a $10,000 advance that is recorded in Unearned Revenue. If no adjusting entry is made at year end, how will the financial statements be affected? a. b. c. d. Net income overstated overstated understated understated Assets not affected overstated not affected understated Liabilities understated not affected overstated not affected Section 5PREPAID (DEFERRED) EXPENSES 1. Your firm buys $27,000 of office supplies and debits Supplies Expense. If, at year end, $6,000 of supplies are on hand, what adjusting entry will you record? a. b. c. d. 2. Supplies On Hand Supplies Expense Supplies On Hand Supplies Expense Supplies Expense Supplies On Hand Supplies Expense Supplies On Hand 6,000 6,000 21,000 21,000 21,000 21,000 6,000 6,000 Your company prepays $15,000 for a 1year insurance policy that you recorded in Prepaid Insurance. When the fiscal year ends 3 months later, what adjusting entry will you record? a. Testbank Prepaid Insurance 11,250 7 Mastering Adjusting Entries b. c. d. Testbank Insurance Expense Prepaid Insuranc1e Insurance Expense Insurance Expense Prepaid Insurance Insurance Expense Prepaid Insurance 11,250 3,750 3,750 11,250 11,250 3,750 3,750 8 Mastering Adjusting Entries 3. On October 1, your calendar year company signs a $20,000 contract to have its offices painted and makes a downpayment of $14,000 that you recorded in Painting Expense. If, on December 31, management informs you that 25% of the work has been completed, what adjusting entry will you record? a. b. c. d. 4. Your calendar year company pays $12,000 a year for security services. On November 1, you remit payment for the next 3 months' service and record it in Prepaid Security Expense. At year end, what adjusting entry will you record? a. b. c. d. 5. Prepaid Security Expense 1,000 Security Expense Security Expense 2,000 Prepaid Security Expense Security Expense 3,000 Prepaid Security Expense Prepaid Security Expense 1,000 Cash 1,000 2,000 3,000 1,000 On September 1, your calendar year company pays $12,000 for 1 year's rent that you debit to Prepaid Rent. At year end, what adjusting entry will you record? a. b. c. d. 6. a debit to Painting Expense for $5,000 a credit to Painting Expense for $9,000 a debit to Painting Expense for $9,000 a credit to Painting Expense for $5,000 Prepaid Rent Rent Expense Rent Expense Cash Rent Expense Prepaid Rent Prepaid Rent Rent Expense 4,000 4,000 4,000 4,000 4,000 4,000 8,000 8,000 In June, your calendar year company pays $1,200 for a 1year insurance policy that you recorded in Prepaid Insurance. If you do not record an adjusting entry at year end, how will the financial statements be affected? a. b. c. d. Testbank Net income overstated overstated understated understated Assets not affected overstated not affected understated Liabilities understated not affected overstated not affected 9 Mastering Adjusting Entries 7. In October, your calendar year company pays $1,200 for 1 year's rent that you recorded in Rent Expense. If you do not record an adjusting entry at year end, how will the financial statements be affected? a. b. c. d. 8. Assets not affected overstated not affected understated Liabilities understated not affected overstated not affected In July, your calendar year company pays $1,200 for 1 year's insurance that you recorded in Prepaid Insurance. If you do not record an adjusting entry at year end, how will the financial statements be affected? a. b. c. d. 9. Net income overstated overstated understated understated Net income overstated overstated understated understated Assets overstated understated overstated understated In April, your calendar year company pays $1,200 for 1 year's rent that you recorded in Prepaid Rent. If you do not record an adjusting entry at year end, how will the financial statements be affected? a. b. c. d. Net income overstated overstated understated understated Assets overstated understated overstated understated 10. On August 1, 20X8, your calendar year firm takes out a 3year insurance policy at a total cost of $3,600 that requires a 50% downpayment and the remainder after 6 months. Insurance expense for 20X8 is: a. b. c. d. $500 $600 $1,200 $1,800 Section 6OTHER ENDOFPERIOD ENTRIES 1. A plant asset with an original cost of $121,875 and a residual value of $15,000 has a useful life of 9 years. Under the straightline method, the journal entry to record the annual depreciation expense is: a. b. c. Testbank Depreciation Expense Accumulated Depreciation Depreciation Expense Accumulated Depreciation Depreciation Expense 13,542 13,542 11,875 11,875 10,250 10 Mastering Adjusting Entries d. Fixed Asset Depreciation Expense Accumulated Depreciation 10,250 1,625 1,625 2. Company A has a fixed asset with an original cost of $300,000, a residual value of $25,000 and a useful life of 10 years. The company also has land with an original cost of $1,000,000. Under the straightline method, the journal entry to record the annual depreciation expense is: a. Depreciation Expense 27,500 Accumulated Depreciation 27,500 b. Depreciation Expense 30,000 Fixed Asset 30,000 c. Depreciation Expense 26,000 Accumulated Depreciation 26,000 d. Depreciation Expense 5,000 Accumulated Depreciation 5,000 3. Company B estimates bad debt expense at 2% of credit sales, which were $610,000 for the year. The journal entry to record bad debt expense is: a. b. c. d. 4. 8,580 8,580 8,580 8,580 12,200 12,200 5,720 5,720 If, at year end, the balance in A/R is $920,000, of which 5% is estimated to be uncollectible, and the Allowance for Doubtful Accounts has a credit balance of $34,000, the journal entry to record bad debt expense is: a. b. c. d. 5. Bad Debt Expense Allowance for Doubtful Accounts Allowance for Doubtful Accounts Bad Debt Expense Bad Debt Expense Allowance for Doubtful Accounts Allowance for Doubtful Accounts Bad Debt Expense Bad Debt Expense Allowance for Doubtful Accounts Allowance for Doubtful Accounts Bad Debt Expense Bad Debt Expense Allowance for Doubtful Accounts Allowance for Doubtful Accounts Bad Debt Expense 46,000 46,000 46,000 46,000 12,000 12,000 12,000 12,000 If, at year end, the balance in A/R is $525,000, of which 4% is estimated to be uncollectible, and the Allowance for Doubtful Accounts has a debit balance of $7,000, the journal entry to record bad debt expense is: a. b. Testbank Bad Debt Expense Allowance for Doubtful Accounts Allowance for Doubtful Accounts Bad Debt Expense 28,000 28,000 21,000 21,000 11 Mastering Adjusting Entries c. d. 6. b. c. d. 28,000 28,000 Net income overstated overstated understated understated Assets overstated understated overstated understated Depreciation Expense Accumulated Depreciation Depreciation Expense Accumulated Depreciation Accumulated Depreciation Depreciation Expense Accumulated Depreciation Depreciation Expense 10,250 10,250 11,875 11,875 11,875 11,875 10,250 10.250 Company F has a fixed asset with a useful life of 5 years and a residual value of $22,000. The asset had an original cost of $152,000 and the company's land had an original cost of $750,000. What is the adjusting entry to record annual depreciation under the straightline method? a. b. c. d. 9. 7,000 If Company E has a fixed asset with an original cost of $95,000, a useful life of 8 years and a residual value of $13,000, the journal entry for annual depreciation under the straightline method is: a. 8. 7,000 Your company estimates bad debt expense as a percentage of Accounts Receivable that will be uncollectible, which comes to $18,000 for the current year. The Allowance for Doubtful Accounts has a credit balance of $15,000. If no adjusting entry is recoded at year end, how will the financial statements be affected? a. b. c. d. 7. Bad Debt Expense Allowance for Doubtful Accounts Allowance for Doubtful Accounts Bad Debt Expense Depreciation Expense Fixed Asset Depreciation Expense Accumulated Depreciation Depreciation Expense Accumulated Depreciation Accumulated Depreciation Depreciation Expense 30,400 30,400 180,400 180,400 26,000 26,000 176,000 176,000 Company G has a fixed asset with an original cost of $73,000, a useful life of 6 years and a residual value of $8,000. The journal entry to record Company G's annual depreciation under the straightline method is: a. Testbank Depreciation Expense 12,167 12 Mastering Adjusting Entries b. c. d. Accumulated Depreciation Accumulated Depreciation Depreciation Expense Accumulated Depreciation Depreciation Expense Depreciation Expense Accumulated Depreciation 12,167 12,167 12,167 10,833 10.833 10,833 10,833 10. You are given the following data for a fixed asset: Original cost Useful life Residual value $31,000 9 years $4,000 How do you record annual depreciation for the asset under the straight line method? a. b. c. d. Depreciation Expense Fixed Asset Depreciation Expense Accumulated Depreciation Accumulated Depreciation Depreciation Expense Depreciation Expense Accumulated Depreciation 444 444 3,000 3,000 3,444 3,444 3,444 3,444 11. The data for a fixed asset owned by Company H is as follows: Original cost Useful life Residual value $223,000 7 years $40,000 The journal entry to record the asset's annual depreciation under the straightline method is: a. b. c. d. Depreciation Expense Accumulated Depreciation Accumulated Depreciation Depreciation Expense Depreciation Expense Accumulated Depreciation Accumulated Depreciation Depreciation Expense 26,143 26,143 26,143 26,143 31,857 31,857 5,714 5,714 12. If your firm estimates bad debt expense as 2% of credit sales, which are $286,000 for the year, and the Allowance for Doubtful Accounts has a debit balance of $2,860, how do you record bad debt expense? a. Testbank Bad Debt Expense 8,580 13 Mastering Adjusting Entries b. c. d. Testbank Allowance for Doubtful Accounts Allowance for Doubtful Accounts Bad Debt Expense Bad Debt Expense Allowance for Doubtful Accounts Allowance for Doubtful Accounts Bad Debt Expense 8,580 8,580 8,580 5,720 5,720 5,720 5,720 14 Mastering Adjusting Entries 13. If CheapCo estimates bad debt expense as a percentage of its $159,000 credit sales, estimates 3% for this year and has an Allowance for Doubtful Accounts with a credit balance of $1,230, how does it record bad debt expense? a. b. c. d. Bad Debt Expense Allowance for Doubtful Accounts Bad Debt Expense Allowance for Doubtful Accounts Allowance for Doubtful Accounts Bad Debt Expense Allowance for Doubtful Accounts Bad Debt Expense 4,770 4,770 3,540 3,540 4,770 4,770 3,540 3,540 14. If a company fails to record an adjusting entry for depreciation expense at year end, how will the financial statements be affected? a. b. c. d. Net income overstated overstated understated understated Assets overstated understated overstated understated 15. ByCo estimates bad debt as a percentage of credit sales. If it fails to record an adjusting entry at year end, how will it affect ByCo's financial statements? a. b. c. d. Net income overstated overstated understated understated Assets overstated understated overstated understated 16. This year, your company estimates that $18,000 of A/R will be uncollectible. The Allowance for Doubtful Accounts has a credit balance of $5,000. If no adjusting journal entry is recorded, how will the financial statements be affected? a. b. c. d. Testbank Net income overstated overstated understated understated Assets overstated understated overstated understated 15 Mastering Adjusting Entries Section 7 FROM UNADJUSTED TRIAL BALANCE TO FINANCIAL STATEMENTS and Section 8 APPLYING YOUR KNOWLEDGE TO THE TRIAL BALANCE 1. Adjusting entries: a. b. c. d. 2. Interest Receivable and Interest Payable are: a. b. c. d. 3. Prepaid Rent Accrued Salaries Payroll Taxes Payable Unearned Revenue The chart of accounts is normally presented in the following sequence: a. b. c. d. 6. Prepaid Taxes Interest Income Rent Expense Equipment Which of the following is not a liability account? a. b. c. d. 5. balance sheet accounts income statement accounts liability accounts asset accounts Which of the following accounts normally has a credit balance? a. b. c. d. 4. always involve two income statement accounts always involve a balance sheet account and an income statement account never involve cash both b and c Income, Expense, Asset, Liability, Equity Equity, Liability, Asset, Expense, Income Asset, Liability, Equity, Revenue, Expenses None of the above Numbering of accounts is generally in the following sequence: a. b. c. d. Testbank Income, Expense, Asset, Liability, Equity Equity, Liability, Asset, Expense, Income established by GAAP none of the above 16 Mastering Adjusting Entries 7. Which of the following accounts has a normal debit balance? a. b. c. d. 8. Which of the following accounts has a normal credit balance? a. b. c. d. 9. Rent Receivable Interest Payable Prepaid Legal Fees both a and c Accumulated Depreciation Unearned Revenue Supplies OnHand both a and b Which of the following accounts has a normal debit balance? a. b. c. d. Accumulated Depreciation Allowance for Doubtful Accounts Rent Revenue none of the above 10. Which of the following accounts has a normal credit balance? a. b. c. d. Testbank Unearned Subscription Revenue Supplies OnHand Interest Receivable none of the above 17 Mastering Adjusting Entries Questions 1114: MidCo is a calendar year company. Below is its partial worksheet for, for the year ended December 31, 20X8. Use the data to answer the next four questions. Accounts Receivable Allow. For Doubtful Accounts Supplies On Hand Wages Payable Notes Payable Bad Debt Expense Supplies Expense Wage Expense Unadjusted trial balance Dr Cr 50,000 2,000 1,500 Adjustments Dr Cr Adjusted trial balance Dr Cr 1,000 20,000 600 4,000 11. If the partial adjustment to Wages Payable is correct, what is the adjusted balance in Wage Expense? a. b. c. d. $4,000 $5,000 $3,000 $1,000 12. If the adjustment to Supplies Expense is correct, what is the adjusted balance in Supplies On Hand? a. b. c. d. $1,500 $2,100 $1,900 $900 13. If the company estimates 4% of Accounts Receivable to be uncollectible, what is the debit to Bad Debt Expense in the adjustments column? a. b. c. d. $0 $2,000 $4,000 $1,000 14. On July 1, 20X6, the company borrowed $20,000 and must repay principal and accrued interest of 10% a year on July 1, 20X9. Based on this information, the debit to Interest Expense in the Adjustments column is: a. b. c. d. Testbank $0 $1,000 $2,000 $4,000 18Step by Step Solution
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