Use the following information to answer the next two questions:

Shindo Inc. purchased land owned by Buffet, Inc. for $375,000 by giving a 300-day, 16% note payable.

1. The journal entry would include a debit to which type of account?

A. Asset

B. Liability

C. Owners Equity

D. Revenue

E. Expense

2. The journal entry would include a credit to which type of account?

A. Asset

B. Liability

C. Owners Equity

D. Revenue

E. Expense

3. The CPA firm auditing Gable Company found that net income had been overstated. Which of the following errors could be the cause?

A. No entry made to record purchase of land for cash on the last day of the year.

B. Failure to record dividends declared and paid for the period.

C. Failure to record payment in cash of accounts payable on the last day of the year.

D. Failure to make an adjusting entry to record revenue which had been earned but not yet billed to customers.

E. None of the above.

4. The purpose of adjusting entries is to:

A. Update the balance in Common Stock.

B. Record certain revenue and expenses that are not properly measured in the course of recording daily routine transactions.

C. Update the balance in the Cash account.

D. Close all temporary accounts.

E. None of the above.

5. Depreciation expense may be described best as the:

A. Decline in the market value of an asset during the period.

B. Systematic allocation of the cost of long-lived assets to expense.

C. Cash payments made during the period on loans used to finance the purchase of assets such as buildings and equipment.

D. Cash being set aside each period to provide for the replacement of long-lived assets, such as buildings and equipment.

E. None of the above.