Accounting Chapter 4 Review

Metlock, Inc. purchased office supplies costing $6300 and debited Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $1620 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be:

Debit Supplies expense $4,680, Credit Supplies $4,680

A company's adjusted trial balance overstates the value of its Cash account by $350. This error (would/would not) not have a direct effect on the accuracy of the company's income statement.

would not

Adjusting entries are necessary to...

To ensure the expense recognition principle is followed, to enable financial statements to be in conformity with the GAAP, and to ensure the revenue recognition principle is followed.

Which of the following is only prepared after adjusting entries are journalized and posted?

adjusted trial balance

Unearned revenues is classified as a(n) ________ account.

liability

A(n) ________ account is debited and a(n) ________ is credited when an adjusting entry for unearned revenue is prepared.

liability; revenue

Goods purchased for future use in the business, such as supplies, are called:

prepaid expenses

Metlock, Inc. had the following transactions during 2016: • Sales of $9720 on account • Collected $4320 for services to be performed in 2017 • Paid $2340 cash in salaries for 2016 • Purchased airline tickets for $540 in December for a trip to take place in 2017 What is Metlock's 2016 net income using cash basis accounting?

$1,400 Record on cash flows. + Collected cash for services - Paid cash in salaries - purchased tickets in cash

On January 1, 2016, Kingbird, Inc. purchased equipment for $28500. The company is depreciating the equipment at the rate of $1140 per month. At January 31, 2017, the balance in Accumulated Depreciation is:

$14,820 credit

Which of the following statements is true? A. The adjusted trial balance is prepared after adjusting entries have been posted. B. An adjusted trial balance should show the company's net income. C. An adjusted trial balance is prepared after the financial statements are prepared. D. The adjusted trial balance lists the account balances in the order of their amounts, from high to low.

A. The adjusted trial balance is prepared after adjusting entries have been posted.

Which of the following items describe the two classifications of adjusting entries?

Accruals and deferrals

Which of the following statements is correct in relation to the closing entry process? A. All assets and liability accounts are closed at the financial year end. B. All permanent accounts are closed at the financial year end. C. All of the choices are correct. D. All temporary accounts are closed at the financial year end.

D. All temporary accounts are closed at the end of the financial year

Which of the following is not a typical example of a prepaid expense? A. Rent B. Supplies C. Insurance D. Wages

D. Wages

Under the cash basis of accounting, A. a promise to pay is sufficient to recognize revenue. B. expenses are matched with the revenue that is produced. C. revenue is recognized when services are performed. D. cash must be received before revenue is recognized.

D. cash must be received before revenue is recognized

On April 1, 2017, Bramble Corp. paid $47000 cash for equipment that will be used in business operations. The equipment will be used for four years. Bramble's records depreciation expense of $47000 for the calendar year ending December 31, 2017. Which accounting principle has been violated?

Expense recognition principle

T/F: An adjusted trial balance is prepared before all transactions have been journalized.

False.

At the end of the fiscal year, the usual adjusting entry for accrued salaries owed to employees was omitted. Which of the following statements is true?

Liabilities at the end of the year are understated

Which types of accounts will appear in the post-closing trial balance?

Permanent accounts

Merando Industries employs a 5-day workweek and a September 30 year-end. Normal weekly wages amount to $28000. If September 30 ends on a Wednesday, what is the appropriate journal entry on October 2, the next payday for Merando?

Salaries and Wage Expense $11,200 Salaries and Wages Payable $16,800 Cash $28,000

Starshine Industries employs a five-day workweek (Monday through Friday) and a September 30 year-end. Normal weekly wages amount to $24,000. If September 30 ends on a Wednesday, what is the appropriate journal entry at fiscal year-end?

Wages Expense $14,400 Wages Payable $14,400

When are expenses recognized?

When they contribute to the production of revenue

A revenue-asset relationship exists with:

accrued revenue adjusting entry

The difference between the cost of a depreciable asset and its related accumulated depreciation is referred to as the:

book value of the asset

Which of the following statements is true?

cash must be received before revenue is recorded.

If as of December 31, 2017, rent of $171 for December had not been recorded or paid, the adjusting entry would include a:

debit to Rent expense for $171

As prepaid expenses expire with the passage of time, the correct adjusting entry will be a:

debit to the asset account, credit to the expense account

When making an adjusting entry for accrued revenues, a company should ________ an asset account and ________ a revenue account.

debit; credit

The expense recognition principle matches:

expenses with revenues

Sheridan Company purchased a one-year insurance policy in January 2016 for $35280. The insurance policy is in effect from March 2016 through February 2017. If the company neglects to make the proper year-end adjustment for the expired insurance:

net income and assets will be overstated by $29,400

If the adjusting entry is not made for unearned revenues, then the result will be to

overstate liabilities and understate revenues