Module 2: Adjusting & Closing Entries Questions

Which of the following accounts is NOT involved in closing entries?

Prepaid Insurance.

The primary difference between accrual-basis and cash-basis accounting is:

The timing of when revenues and expenses are recorded.

When a company makes an end-of-period adjusting entry which includes a debit to Utilities Expense, the usual credit entry is made to:

Accounts (utilities) Payable.

The closing process includes which of the following?

Closing the balances of revenue, expense and dividend accounts to zero.

At the beginning of December, LSUS Corporation had $1,000 in supplies on hand. During the month, supplies purchased amounted to $2,000, but by the end of the month the supplies balance was only $200. What is the appropriate month-end adjusting entry?

Debit Supplies Expense $2,800, credit Supplies $2,800.

LSUS Consulting provides 3 months consulting service for 6,000 to Scheinert Inc. starting Jan 1, 2023. The payment is due on March 31st. Please assume service are performed evenly throughout months. On Jan 31, 2023 LSUS prepare a financial statement, what would LSUS consulting record as the adjusting entry for this consulting work on Jan 31, 2023?

Debit accounts receivable for 2,000; Credit consulting services for 2,000

At beginning of year 1, LSUS purchased a $10,000 manufacturing equipment that is estimated to be used for five years. (no residue value after five years) If the equipment is going to be depreciated evenly over five years, what would be the correct adjusting entry at end of year1 for this equipment?

Debit depreciation expense for $2,000; credit accumulated depreciation for $2,000

Mod Inc.'s beginning of October supplies was $400. Mod purchased $800 worth of supplies during October. At the end of October Mod's balance of supplies was $500. What will be Mod's end of October adjusting entry for supplies?

Debit supplies expenses for $700; Credit supplies for $700

On September 1, 2022, LSUS Magazine sold 100 one-year subscriptions for $120 each. The total amount received was credited to Unearned Revenue. What would be the required adjusting entry at December 31, 2022?

Debit unearned revenue by $4,000, credit service revenue by $4,000

LSUS consulting incurred $500 utility expense during their first month of operation. They will pay 20 days later when the bill is due. What would be the adjusting entry at the end of the month when LSUS prepare the financial statement?

Debit utility expense for $500; Credit utility payable for $500

Which one of the following accounts would go to zero after closing entries?

Dividends

The expense recognition principle states that:

Expense should be recognized in the period incurred.

An adjusted trial balance:

Is a list of all accounts and their balances after adjusting entries.

The trial balance best for prepare income statement is:

adjusted trial balance

The employees of smallshop work Monday through Friday. Every Friday the company issues payroll checks totaling $5,000. The current pay period ends on Friday, January 3. Smallshop is now preparing financial statements for the year ended December 31, (which is a Tuesday). What is the adjusting entry to record accrued salaries at the end of the year?

debit salaries expense by 2,000, credit salaries payable by 2,000

On April 1, a $4,800 premium on a one-year insurance policy on equipment was paid and charged to Prepaid Insurance. At the end of the year, the adjusting entry would be:

debit insurance Expense, $3,600; credit prepaid Insurance $3,600.

The closing entry for expenses includes:

A debit to Retained Earnings and a credit to all expense accounts.

The closing entry for revenues includes:

A debit to Revenues and a credit to Retained Earnings.

A list of all accounts and their balances after posting closing entries is referred to as:

A post-closing trial balance.

Making insurance payments in advance is an example of:

A prepaid expense.

Adjusting entries:

Always involve at least one revenue/expense and one balance sheet account.

The income statement reports earned income on _____, and the cashflow statement is based on ______.

An accrual-basis, cash-basis accounting

The purpose of closing entries is to transfer:

Balances in temporary accounts to a permanent account.

Permanent accounts would not include:

interest expense

When preparing balance sheet you have the choices of using the following trial balances: the unadjusted, adjusted, and post-closing balance. Which one of the three would make the preparation process the easiest (least steps) as well as ensure the accuracy of the financial statement?

post-closing trial balance