Which of the following statements regarding depreciation is correct?

Question 11 options:

	Depreciation is an exact calculation of the decline in value of an asset.
	Depreciation is only an estimate of the decline in value of an asset.
	Depreciation is only recorded at the end of a year and never over a shorter time period.
	Management must know the exact life of an asset in order to calculate an acceptable depreciation expense.

Question 12 (2 points)

Saved

Listen

The accountant for the Grassroots Company failed to make an adjusting entry to record revenue earned but not yet billed to customers. The effect of this error is:

Question 12 options:

	An overstatement of assets and of net income offset by an understatement of owners' equity.
	An overstatement of net income and an understatement of assets.
	An understatement of assets, net income, and owners' equity.
	An overstatement of liabilities offset by an understatement of owners' equity.

Question 13 (2 points)

Saved

Listen

Omega Company adjusts its accounts at the end of each month. The following information has been assembled in order to prepare the required adjusting entries at December 31, Year 1:

(1) A one-year bank loan of $720,000 at an annual interest rate of 12% had been obtained on December 1, Year 1.

(2) The company pays all employees up-to-date each Friday. Since December 31, Year 1, fell on Tuesday, there was a liability to employees at that date for two day's pay amounting to $6,800.

(3) On December 1, Year 1, rent on the office building had been paid for four months. The monthly rent is $6,000.

(4) Depreciation of office equipment is based on an estimated useful life of six years. The balance in the Office Equipment account is $9,360; no change has occurred in the account during the year.

(5) Fees of $9,800 were earned during the month for clients who had paid in advance.

By what amount will the book value of the office equipment decline after the appropriate December adjustment is recorded?

Question 13 options:

	$1,560
	$130
	$0
	$1,430

Question 14 (2 points)

Saved

Listen

Which of the following entries causes an immediate decrease in assets and in net income?

Question 14 options:

	The entry to record depreciation expense.
	The entry to record revenue earned but not yet received.
	The entry to record the earned portion of rent received in advance.
	The entry to record accrued wages payable.

Question 15 (2 points)

Saved

Listen

Interest that has accrued during the accounting period on a note payable requires an adjusting entry consisting of:

Question 15 options:

	A debit to Interest Expense and a credit to Cash.
	A debit to Notes Payable and a credit to Interest Payable.
	A debit to an asset and a credit to a liability.
	A debit to Interest Expense and a credit to Interest Payable.