acg ch.4 quiz

On September 1, Crestview Company purchased equipment for $25,000. The equipment's estimated salvage value is $2,500. The machine will be depreciated using straight-line depreciation and a five year life. If the company prepares annual financial statements on December 31, the appropriate adjusting journal entry to make on December 31 of the first year would be a

$1,500 debit to Depreciation Expense and a $1,500 credit to Accumulated Depreciation. Straight-line annual depreciation per year = (Cost - Salvage value)/Life = (25,000 - 2,500)/5 = $4,500 per yearThe correct adjusting entry to record depreciation for 4 months (i.e., September 1 through December 31) is $4,500 per year x 4/12 = $1,500.

On September 1, Crestview Company purchased equipment for $25,000. The equipment's estimated salvage value is $3,400. The machine will be depreciated using straight-line depreciation and a four year life. If the company prepares annual financial statements on December 31, the appropriate adjusting journal entry to make on December 31 of the first year would be a

$1,800 debit to Depreciation Expense and a $1,800 credit to Accumulated Depreciation. Straight-line annual depreciation per year = (Cost - Salvage value)/Life = (25,000 - 3,400)/4 = $5,400 per year The correct adjusting entry to record depreciation for 4 months (i.e., September 1 through December 31) is $5,400 per year x 4/12 = $1,800.

Bonita Realty Management Co. received a check for $30,000 on September 1, which represents a one year advance payment of rent on an office it rents to a client. Unearned Rent Revenue was credited when the realty company collected the rent. Financial statements are prepared on December 31. The appropriate year-end adjusting journal entry that the realty company must record for the first year would be a

$10,000 debit to Unearned Rent Revenue and a $10,000 credit to Rent Revenue. The revenue earned from September 1 through December 31 = 30,000 x 4/12 = 10,000.

Based on the following adjusted trial balance: Peak Corporation Adjusted Trial Balance As of December 31, 2018 Debit Credit Cash $ 800 Accounts Receivable 200 Inventory 2,000 Building 30,000 Accumulated Depreciation $ 1,000 Notes Payable 3,000 Common Stock 17,000 Retained Earnings 10,000 Dividends 3,000 Revenues 7,000 Selling and Administrative Expense 1,000 Insurance Expense 1,000 $ 38,000 $ 38,000 Determine the amount that will be reported as retained earnings on the post-closing trial balance.

$12,000 Post-closing: Ending retained earnings = beginning retained earnings + revenues - expenses - dividends = $10,000 + 7,000 - 1,000 - 1,000 - 3,000 = $12,000

Crowley Company has the following adjusted trial balance: Debit Credit Cash 550 Accounts receivable 300 Prepaid rent 100 Equipment 6,000 Accumulated depreciation-Equipment 2,200 Accounts payable 300 Unearned service revenue 350 Common stock 1,400 Retained earnings 1,100 Service revenue 3,250 Interest revenue 50 Salaries and wages expense 1,200 Depreciation expense 300 Rent expense 200 Total 8,650 8,650 After closing entries have been journalized and posted, the balance in the company's retained earnings account will be

$2,700. Ending retained earnings = Beginning retained earnings + revenues - expenses - dividends Ending retained earnings = 1,100 + 3,250 + 50 - 1,200 - 300 - 200 = 2,700

Cromarte Company has the following adjusted trial balance: Debit Credit Cash 300 Accounts receivable 600 Prepaid rent 100 Equipment 5,000 Accumulated depreciation-Equipment 1,500 Accounts payable 300 Unearned service revenue 100 Common stock 1,200 Retained earnings 1,900 Service revenue 3,000 Interest revenue 100 Salaries and wages expense 1,200 Depreciation expense 500 Rent expense 400 Total 8,100 8,100 After closing entries have been journalized and posted, the balance in the company's retained earnings account will be

$2,900. Ending retained earnings = Beginning retained earnings + revenues - expenses - dividends Ending retained earnings = 1,900 + 3,000 + 100 - 1,200 - 500 - 400 = 2,900

The following is information from Lewis Corporation's financial records for the current fiscal year .i. Cash received from customers, $350,000 ii. Revenue earned, $390,000 iii. Cash paid for wages, $150,000 iv. Wages incurred, $160,000 v. Cash received from shareholders for additional shares of stock, $40,000 What is the company's net income for the current year using the cash-basis of accounting?

$200,000 Net income using the cash-basis = Cash collected from customers - cash paid for expenses incurred including prepaid expenses Net income using the cash-basis = $350,000 - 150,000 = $200,000

The following is information from Lewis Corporation's financial records for the current fiscal year.i. Cash received from customers, $310,000ii. Revenue earned, $330,000iii. Cash paid for wages, $140,000iv. Wages incurred, $125,000v. Cash received from shareholders for additional shares of stock, $10,000What is the company's net income for the current year using the accrual basis of accounting?

$205,000 Net income using the accrual basis = Revenue earned - expenses incurred including depreciation Net income using the accrual basis = $330,000 - 125,000 = $205,000

The following is information from Lewis Corporation's financial records for the current fiscal year. i. Cash received from customers, $375,000 ii. Revenue earned, $380,000 iii. Cash paid for wages, $180,000 iv. Wages incurred, $165,000 v. Cash received from shareholders for additional shares of stock, $30,000 What is the company's net income for the current year using the accrual basis of accounting?

$215,000 Net income using the accrual basis = Revenue earned - expenses incurred including depreciation Net income using the accrual basis = $380,000 - 165,000 = $215,000

Bonita Realty Management Co. received a check for $36,000 on April 1, which represents a one year advance payment of rent on an office it rents to a client. Unearned Rent Revenue was credited when the realty company collected the rent. Financial statements are prepared on December 31. The appropriate year-end adjusting journal entry that the realty company must record for the first year would be a

$27,000 debit to Unearned Rent Revenue and a $27,000 credit to Rent Revenue. The revenue earned from April 1 through December 31 = 36,000 x 9/12 = 27,000.

On June 1, Long Corporation signed a $36,000, 16%, 2-year note to help finance renovations being made to the corporation headquarters. Assuming interest is accrued only when the year ends on December 31, the appropriate journal entry for the first year would be a

$3,360 debit to Interest Expense and a $3,360 credit to Interest Payable. ($36,000 x 0.16 x 7/12 = $3,360)

Kepler Company borrowed money from a bank by signing a three-year note payable in the amount of $18,000 on September 1, 2018. The note requires Kepler Company to pay interest at an annual rate of 9%. Kepler Company records adjusting entries on December 31. The adjusting entry that Kepler Company should record for accrued interest on December 31, 2018 would include a debit to Interest Expense fore? Correct!

$540 Interest = Principal x Rate x Time = $18,000 x 9% x 4/12 = $540

Cromarte Company has the following adjusted trial balance: Debit Credit Cash 300 Accounts receivable 600 Prepaid rent 100 Equipment 5,000 Accumulated depreciation-Equipment 1,500 Accounts payable 300 Unearned service revenue 100 Common stock 1,200 Retained earnings 1,900 Service revenue 3,000 Interest revenue 100 Salaries and wages expense 1,200 Depreciation expense 500 Rent expense 400 Total 8,100 8,100 After closing entries have been journalized and posted, the post-closing trial balance total for the credit column will be

$6,000. Total credits in the post-closing trial balance = 8,100 - 1,200 - 500 - 400 = 6,000

Cross Company has the following adjusted trial balance: Debit Credit Cash 300 Accounts receivable 500 Prepaid rent 100 Equipment 6,000 Accumulated depreciation-Equipment 1,800 Accounts payable 400 Unearned service revenue 500 Common stock 1,400 Retained earnings 1,600 Service revenue 3,000 Interest revenue 100 Salaries and wages expense 950 Depreciation expense 500 Rent expense 450 Total 8,800 8,800 After closing entries have been journalized and posted, the post-closing trial balance total for the credit column will be

$6,900. Total credits in the post-closing trial balance = the total credits of the adjusted trial balance + expenses and dividends (if any). Total credits in the post-closing trial balance = 8,800 - 950 - 500 - 450 = 6,900

Kepler Company borrowed money from a bank by signing a three-year note payable in the amount of $15,000 on July 1, 2018. The note requires Kepler Company to pay interest at an annual rate of 8%. Kepler Company records adjusting entries on December 31. The adjusting entry that Kepler Company should record for accrued interest on December 31, 2018 would include a debit to Interest Expense for

$600 Interest = Principal x Rate x Time = $15,000 x 8% x 6/12 = $600

Kepler Company borrowed money from a bank by signing a three-year note payable in the amount of $15,000 on July 1, 2018. The note requires Kepler Company to pay interest at an annual rate of 8%. Kepler Company records adjusting entries on December 31. The adjusting entry that Kepler Company should record for accrued interest on December 31, 2018 would include a debit to Interest Expense for

$600 Interest = Principal x Rate x Time = $15,000 x 8% x 6/12 = $600

On August 1, Crestview Company purchased equipment for $8,000. The equipment's estimated salvage value is $500. The machine will be depreciated using straight-line depreciation and a five year life. If the company prepares annual financial statements on December 31, the appropriate adjusting journal entry to make on December 31 of the first year would be a

$625 debit to Depreciation Expense and a $625 credit to Accumulated Depreciation. Straight-line annual depreciation per year = (Cost - Salvage value)/Life = (8,000 - 500)/5 = $1,500 per year The correct adjusting entry to record depreciation for 5 months (i.e., August 1 through December 31) is $1,500 per year x 5/12 = $625.

Crowley Company has the following adjusted trial balance: Debit Credit Cash 800 Accounts receivable 500 Prepaid rent 100 Equipment 6,000 Accumulated depreciation-Equipment 2,200 Accounts payable 400 Unearned service revenue 500 Common stock 1,400 Retained earnings 1,600 Service revenue 3,000 Interest revenue 50 Salaries and wages expense 950 Depreciation expense 500 Rent expense 300 Total 9,150 9,150 After closing entries have been journalized and posted, the post-closing trial balance total for the credit column will be

$7,400. Total credits in the post-closing trial balance = the total credits of the adjusted trial balance - expenses and dividends (if any). Total credits in the post-closing trial balance = 9,150 - 950 - 500 - 300 = 7,400

On August 1, Crestview Company purchased equipment for $8,000. The equipment's estimated salvage value is $800. The machine will be depreciated using straight-line depreciation and a four year life. If the company prepares annual financial statements on December 31, the appropriate adjusting journal entry to make on December 31 of the first year would be a

$750 debit to Depreciation Expense and a $750 credit to Accumulated Depreciation. Straight-line annual depreciation per year = (Cost - Salvage value)/Life = (8,000 - 800)/4 = $1,800 per year The correct adjusting entry to record depreciation for 5 months (i.e., August 1 through December 31) is $1,800 per year x 5/12 = $750.

A company's adjusted trial balance reports the following accounts and balances: Accounts Receivable, $2,000 Accounts Payable, $200 Accumulated Depreciation-Equipment, $50 Cash, $1,500 Common Stock, $300 Equipment, $3,750 Inventory, $500 Rent Expense, $150 Retained Earnings, $6,600 Salaries and Wages Expense, $200 Service Revenue, 800 Unearned Service Revenue, $150 Each account has its normal balance as either a debit or credit balance. What is the total of the debit and credit columns of the adjusted trial balance?

$8,100 Accounts with debit balances include assets, expenses, and dividends (e.g., $2,000 + 1,500 + 3,750 + 500 + 150 + 200 = $8,100) Accounts with credit balances include liabilities, equities, and revenues (e.g., $200 + 50 + 300 + 6,600 + 800 + 150 = $8,100)

A company's adjusted trial balance reports the following accounts and balances: Accounts Receivable, $2,000 Accounts Payable, $200 Accumulated Depreciation-Equipment, $50 Cash, $1,500 Common Stock, $300 Equipment, $3,750 Inventory, $500 Rent Expense, $150 Retained Earnings, $6,600 Salaries and Wages Expense, $200 Service Revenue, 800 Unearned Service Revenue, $150 Each account has its normal balance as either a debit or credit balance. What is the total of the debit and credit columns of the adjusted trial balance?

$8,100 Accounts with debit balances include assets, expenses, and dividends (e.g., $2,000 + 1,500 + 3,750 + 500 + 150 + 200 = $8,100) Accounts with credit balances include liabilities, equities, and revenues (e.g., $200 + 50 + 300 + 6,600 + 800 + 150 = $8,100)

Based on the following adjusted trial balance: Peak Corporation Adjusted Trial Balance As of December 31, 2018 Debit Credit Cash $ 800 Accounts Receivable 200 Inventory 2,500 Building 30,000 Accumulated Depreciation $ 3,000 Notes Payable 500 Common Stock 21,000 Retained Earnings 5,000 Dividends 1,000 Revenues 7,000 Selling and Administrative Expense 1,000 Insurance Expense 1,000 $ 36,500 $ 36,500 Determine the amount that will be reported as retained earnings on the post-closing trial balance.

$9,000 Post-closing: Ending retained earnings = beginning retained earnings + revenues - expenses - dividends = $5,000 + 7,000 - 1,000 - 1,000 - 1,000 = $9,000

Based on the following adjusted trial balance: Peak Corporation Adjusted Trial Balance As of December 31, 2018 Debit Credit Cash $ 800 Accounts Receivable 200 Inventory 2,500 Building 30,000 Accumulated Depreciation $ 3,000 Notes Payable 500 Common Stock 21,000 Retained Earnings 5,000 Dividends 1,000 Revenues 7,000 Selling and Administrative Expense 1,000 (debit) Insurance Expense 1,000 (debit) $ 36,500 $ 36,500 Determine the amount that will be reported as retained earnings on the post-closing trial balance.

$9,000 Post-closing: Ending retained earnings = beginning retained earnings + revenues - expenses - dividends = $5,000 + 7,000 - 1,000 - 1,000 - 1,000 = $9,000

Based on the following adjusted trial balance: Peak Corporation Adjusted Trial Balance As of December 31, 2018 Debit Credit Cash $ 800 Accounts Receivable 200 Inventory 2,500 Building 30,000 Accumulated Depreciation $ 3,000 Notes Payable 500 Common Stock 21,000 Retained Earnings 5,000 Dividends 1,000 Revenues 7,000 Selling and Administrative Expense 1,000 Insurance Expense 1,000 $ 36,500 $ 36,500 Determine the amount that will be reported as retained earnings on the post-closing trial balance.

$9,000 Post-closing: Ending retained earnings = beginning retained earnings + revenues - expenses - dividends = $5,000 + 7,000 - 1,000 - 1,000 - 1,000 = $9,000

A company's adjusted trial balance reports the following accounts and balances: Accounts Receivable, $2,000 Accounts Payable, $300 Accumulated Depreciation-Equipment, $250 Cash, $1,800 Common Stock, $1,000 Equipment, $3,750 Inventory, $1,200 Rent Expense, $150 Retained Earnings, $6,600 Salaries and Wages Expense, $600 Service Revenue, 1,200 Unearned Service Revenue, $150 Each account has its normal balance as either a debit or credit balance. What is the total of the debit and credit columns of the adjusted trial balance?

$9,500 Accounts with debit balances include assets, expenses, and dividends (e.g., $2,000 + 1,800 + 3,750 + 1,200 + 150 + 600 = $9,500) Accounts with credit balances include liabilities, equities, and revenues (e.g., $300 + 250 + 1,000 + 6,600 + 1,200 + 150 = $9,500)

The following is information is from Clark Corporation's financial records for the current fiscal year. i. Cash received from customers, $150,000 ii. Revenue earned, $195,000 iii. Cash paid for wages, $85,000 iv. Wage expense incurred, $90,000 v. Cash paid during the current year for computers that will be used for 3 years, $24,000 vi. Depreciation expense, $8,000 vii. Proceeds from issuing debt, $50,000 viii. Interest incurred on debt, $5,000 ix. Cash paid for supplies, $3,000 x. Supplies expense incurred, $2,000 What is the company's net income for the current year using the accrual basis of accounting?

$90,000 Net income using the accrual basis = Revenue earned - expenses incurred Net income using the accrual basis = $195,000 - 90,000 - 8,000 - 5,000 - 2,000 = $90,000

Fletcher Company pays its employees their wages each Friday. The most recent payment occurred on Friday, December 26. The next payroll will be paid on January 2. There are three more work days in December after December 26th. Employees work 5 days a week and the company pays $30,000 per week in wages. What will be the adjusting entry to accrue wages expense at the end of December? - A debit to Salaries and Wages Expense for $18,000 - A credit to Salaries and Wages Expense for $6,000 - A credit to Salaries and Wages Expense for $18,000 - No adjusting entry would be required. - A debit to Salaries and Wages Expense for $6,000

A debit to Salaries and Wages Expense for $18,000 Wages for three days = $30,000 x 3/5 = $18,000. Expenses increase with debits.

Closing entries must be journalized and posted. Which of the following accounts will not be closed each year-end? - All of these accounts will be closed each year-end - Accounts Receivable - Dividends - Depreciation Expense - Revenue

Accounts Receivable

Which one of these statements about the accrual-basis of accounting is false? - Companies record revenue only when they receive cash, and record expense only when they pay out cash. - This basis is in accord with generally accepted accounting principles. - Companies recognize revenue in the period in which the performance obligation is satisfied. - Companies record events that change a company's financial statements in the periods in which the events occur. - All of these are true

Companies record revenue only when they receive cash, and record expense only when they pay out cash.

- Which principle dictates that efforts be matched or recorded with accomplishments? - Periodicity principle. - Cost principle. - Economic entity principle. - Expense recognition principle. Revenue recognition principle.

Expense recognition principle.

Which principle dictates that efforts be matched or recorded with accomplishments? - Expense recognition principle. - Cost principle. - Revenue recognition principle. - Economic entity principle. - Periodicity principle.

Expense recognition principle.

The accounting cycle is a series of certain steps that businesses, such as corporations, perform in sequence and repeat in each accounting period. Although steps may be missing among the options listed below, which of the following lists steps of the accounting cycle in their correct order? - Post the transactions, prepare a post-closing trial balance, and journalize and post the adjusting entries. - Prepare the financial statements, prepare the trial balance, and post the closing entries. - Post the closing entries, prepare the adjusted trial balance, and prepare the financial statements, - Post the transactions, post the closing entries, and prepare the adjusted trial balance. - Journalize the transactions, journalize the adjusting entries, and prepare a post-closing trial balance.

Journalize the transactions, journalize the adjusting entries, and prepare a post-closing trial balance.

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 as a result of this omission? - Assets at the end of the year are understated. - Salaries and Wages Expense for the year is overstated. - Liabilities at the end of the year are understated. - Net income for the year is understated. - Stockholders' equity at the end of the year is understated.

Liabilities at the end of the year are understated.

At the end of the fiscal year, the usual adjusting entry for depreciation on equipment was omitted. Which of the following statements is true? - Total expenses will be overstated at the end of the current year. - Net income will be overstated for the current year. - Liabilities will be understated at the end of the current year. - The balance sheet and income statement will be misstated but the statement of retained earnings statement will be correct for the current year. - Total assets will be understated at the end of the current year.

Net income will be overstated for the current year.

Which of the following would not result in unearned revenue? - None of these would result in unearned revenue. - Collecting rent in advance from tenants. - All of these would result in unearned revenue. - Selling season tickets to fans. - Performing services on account.

Performing services on account.

Which account will have a zero balance after closing entries have been journalized and posted? - Retained Earnings - Accounts Receivable - Rent Expense - Common Stock

Rent Expense

Which of the following account's balance will change between the adjusted trial balance and the post-closing trial balance? - Cash - Prepaid Rent - Common Stock - Retained Earnings - Unearned Service Revenue

Retained Earnings

On July 1 of the current year, the MTC Company purchased equipment. The company neglects to record the adjusting-entry for depreciation before preparing the current year's financial statements. Which of the following is correct regarding the company's financial statements for the current year? - Retained earnings is overstated. - Liabilities are understated. - Assets are understated. - Expenses are overstated. - Revenues are understated.

Retained earnings is overstated.

Which of the following is a true statement about year-end closing entries? - All of these are true. - The Dividend account is closed to the Income Summary account. - Revenue and expense accounts are closed to the Income Summary account. - The Income Summary is closed to the Common Stock account. - Revenue accounts must be closed before any other closing entries are recorded.

Revenue and expense accounts are closed to the Income Summary account.

A company shows a balance in Salaries and Wages Payable of $40,000 at the end of the month. The next payroll amounting to $60,000 is to be paid in the following month. What will be the journal entry to record the payment of salaries?

Salaries and Wages Payable ....................... 40,000 Salaries and Wages Expense....................... 20,000 Cash..................................................... 60,000

Which of the following is not included in the computation of net cash provided by operating activities? - Payment of rent - Supplies used - Purchase of insurance - Cash received from customers

Supplies used

Which of the following is not included in the computation of net cash provided by operating activities? - Purchase of insurance - Cash received from customers - Payment of rent - Supplies used

Supplies used

Which of the following is not included in the computation of net cash provided by operating activities? - Purchase of insurance - Supplies used - Payment of rent - Cash received from customers

Supplies used

Which statement is incorrect concerning the adjusted trial balance? - An adjusted trial balance proves the equality of the total debit balances and the total credit balances in the ledger after all adjusting entries have been recorded. - The adjusted trial balance is the primary basis for the preparation of the financial statements. - The adjusted trial balance is prepared after the adjusting entries have been journalized and posted. - All of these are correct statements. - The adjusted trial balance lists the account balances sorting them in order of their dollar magnitude.

The adjusted trial balance lists the account balances sorting them in order of their dollar magnitude.

What is the periodicity assumption? - The economic life of a business can be divided into artificial time periods. - None of these - Companies should match expenses with revenues. - Companies should recognize revenue in the accounting period in which the performance obligation is satisfied. = A principle that a company's fiscal year-end should correspond with the calendar year.

The economic life of a business can be divided into artificial time periods.

Companies prepare various types of trial balances. Which trial balance lists all of a company's permanent accounts but not its temporary accounts? - All of these list the same number of accounts. - The post-closing trial balance - The pre-disclosure trial balance - The adjusted trial balance - The trial balance prepared before recording adjusting entries

The post-closing trial balance

Companies prepare various types of trial balances. Which trial balance lists all of a company's permanent accounts but not its temporary accounts? - The post-closing trial balance - All of these list the same number of accounts. - The trial balance prepared before recording adjusting entries - The adjusted trial balance - The pre-disclosure trial balance

The post-closing trial balance

Which of the following is not a typical example of a prepaid expense? - Rent - Insurance - Wages - Supplies - All of these are examples of prepaids

Wages

Newton Company borrowed money from a bank by signing a three-month note payable in the amount of $10,000 on December 1. The note requires Newton Company to pay interest at an annual rate of 6%. Newton Company records adjusting entries on December 31. The adjusting entry that Newton Company should record for accrued interest on December 31 would include - a debit to Interest Expense for $50. - a debit to Interest Expense for $200. - none of these because no adjusting entry would be necessary. - a credit to Interest Expense for $200. - a credit to Interest Expense for $50.

a debit to Interest Expense for $50. Interest = Principal x Rate x Time = $10,000 x 6% x 1/12 = $50

An adjusting entry - usually affects two balance sheet accounts and no income statement accounts. - must be noted in the books of a company but is never journalized or posted. - usually affects two income statement accounts and no balance sheet accounts. - always affects at least one balance sheet account and one income statement account. - is always a compound entry affecting three or more accounts.

always affects at least one balance sheet account and one income statement account.

An adjusting entry - usually affects two income statement accounts and no balance sheet accounts. - always affects at least one balance sheet account and one income statement account. - usually affects two balance sheet accounts and no income statement accounts. - must be noted in the books of a company but is never journalized or posted. - is always a compound entry affecting three or more accounts.

always affects at least one balance sheet account and one income statement account.

Accrued revenues are revenues for services performed that have not yet been recorded or collected in cash. Failure to record an adjusting entry at the end of a period to record an accrued revenue would cause - an understatement of assets and an understatement of revenues. - an understatement of revenues and an overstatement of liabilities. - an understatement of revenues and an understatement of liabilities. - net income to be overstated. - an overstatement of liabilities and an understatement of revenues.

an understatement of assets and an understatement of revenues.

Accrued revenues are revenues for services performed that have not yet been recorded or collected in cash. Failure to record an adjusting entry at the end of a period to record an accrued revenue would cause - an understatement of assets and an understatement of revenues. - an understatement of revenues and an overstatement of liabilities. - net income to be overstated. - an understatement of revenues and an understatement of liabilities. - an overstatement of liabilities and an understatement of revenues.

an understatement of assets and an understatement of revenues.

If a company fails to adjust for accrued revenues: - liabilities will be understated and revenues will be understated. - liabilities will be overstated and revenues will be understated. - equity will be overstated and revenue will be understated. - assets will be overstated and revenues will be understated. - assets will be understated and revenues will be understated.

assets will be understated and revenues will be understated.

The difference between the cost of a depreciable asset and its related accumulated depreciation is referred to as the: - contra value of the asset. - ledger value. - depreciated difference of the asset. - market value of the asset. - book value of the asset.

book value of the asset.

The difference between an asset's cost and its accumulated depreciation is called - real value. - fair value. - book value. - market value. - nominal value.

book value.

The Harris Company purchased equipment for $9,000 on December 1. It is estimated that annual depreciation on the computer will be $1,800, or $150 per month. If financial statements are to be prepared on December 31, the company should make the following adjusting entry:

debit Depreciation Expense for $150 and credit Accumulated Depreciation for $150.

Baxter Company paid $18,000 for 6 months of rent beginning June 1. Baxter recorded its payment as Prepaid Rent. If financial statements are prepared on June 30, the adjusting entry to be made by Baxter is

debit Rent Expense for $3,000 and credit Prepaid Rent for $3,000. One month of 6 months of prepaid rent has expired by the end of June. The monthly rent expense is the total rent paid divided by the number of months = $18,000/6 months = $3,000 per month.

Boyd Company purchased office supplies costing $5,000 and debited Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $1,800 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be:

debit Supplies Expense for $3,200 and credit Supplies for $3,200. The adjusting entry debits supplies expense and credits supplies by $3,200 (i.e., $5,000 - $1,800 = $3,200).

Intuitive Design Company started business this year and it purchased $5,000 of office supplies and debited Supplies for the full cost. Supplies on hand at the end of the accounting period were $1,300. The company's appropriate adjusting journal entry to be made would be a

debit to Supplies Expense for $3,700 and a credit to Supplies for $3,700. Since this company started business this year (and no beginning supplies were mentioned), beginning supplies should be determined to be zero. Thus, supplies expense = $0 + $5,000 - $1,300 = $3,700. The year-end adjusting journal entry to record Supplies Expense (and to decrease Supplies to the correct ending balance) would be a debit to Supplies Expense for $3,700 and a credit to Supplies for $3,700.

The year-end trial balance for Beltway Corporation appears as follows: Beltway Corporation Trial Balance December 31 Debit Credit Cash $ 300 Accounts Receivable 500 Prepaid Insurance 60 Supplies 140 Equipment 4,000 Accumulated Depreciation, Equipment $ 800 Unearned Revenues 300 Common Stock 1,000 Retained Earnings 1,400 Service Revenue 3,000 Salaries and Wages Expense 1,000 Rent Expense 500 $ 6,500 $ 6,500

debits Depreciation Expense for $400 and credits Accumulated Depreciation for $400.

The year-end trial balance for Beltway Corporation appears as follows: Beltway Corporation Trial Balance December 31 Debit Credit Cash$ 300 Accounts Receivable 500 Prepaid Insurance 60 Supplies 140 Equipment 4,000 Accumulated Depreciation, Equipment $ 800 Unearned Revenues 300 Common Stock 1,000 Retained Earnings 1,400 Service Revenue 3,000 Salaries and Wages Expense 1,000 Rent Expense 500 $ 6,500 $ 6,500 If, at year-end, the unexpired insurance were $20, the company should record an adjusting entry that

debits Insurance Expense for $40 and credits Prepaid Insurance for $40.

The year-end trial balance for Beltway Corporation appears as follows: Beltway Corporation Trial Balance December 31 Debit Credit Cash $ 300 Accounts Receivable 500 Prepaid Insurance 60 Supplies 140 Equipment4,000 Accumulated Depreciation, Equipment $ 800 Unearned Revenues 300 Common Stock 1,000 Retained Earnings 1,400 Service Revenue 3,000 Salaries and Wages Expense 1,000 Rent Expense 500 $ 6,500 $ 6,500 If, at year-end, supplies on hand were $30, the company should record an adjusting entry that

debits Supplies Expense for $110 and credits Supplies for $110. The trial balance lists the company's accounts and their balances on a particular date before adjusting entries have been recorded. This company's trial balance shows that the Supplies account has a balance of $140. However, supplies on hand are only $30; the Supplies account is overstated and it needs to be adjusted. The adjusting entry reduces Supplies and increases Supplies Expense by $110 resulting in an ending balance of $30. Debit the Supplies Expense account by $110 and credit the Supplies account by $110.

The year-end trial balance for Beltway Corporation appears as follows: Beltway Corporation Trial Balance December 31 Debit Credit Cash$ 300 Accounts Receivable 500 Prepaid Insurance 60 Supplies 140 Equipment 4,000 Accumulated Depreciation, Equipment$ 800 Unearned Revenues 300 Common Stock 1,000 Retained Earnings 1,400 Service Revenue 3,000 Salaries and Wages Expense 1,000 Rent Expense 500 $ 6,500 $ 6,500 If the company has not yet recorded its performance of $100 of services to a customer who had paid in advance, the company should record an adjusting entry that

debits Unearned Revenue for $100 and credits Service Revenue for $100.

Year-end adjusting entries for unearned revenues - increase liabilities and increase revenues. - increase revenues and decrease stockholders' equity. - decrease liabilities and increase revenues. - increase assets and increase revenues. - decrease revenues and decrease assets.

decrease liabilities and increase revenues.

The expense recognition principle matches - expenses with equities. - assets with liabilities. - creditors with businesses. - customers with businesses. - expenses with revenues.

expenses with revenues.

In the closing process total revenues are determined to be $4,350 while total expenses are determined to be $3,575 and total dividends are $650. The retained earnings account will

increase by $125. Retained earnings will increase by revenues of $4,350, decrease by expenses of $3,575 and decrease by dividends or $650; retained earnings increases by $125.

Expenses incurred but not yet paid or recorded are called accrued expenses. If a company fails to record a year-end adjusting entry for accrued expenses, the company's - assets will be understated and expenses will be understated. - liabilities will be understated and its expenses will be understated. - assets will be overstated and its expenses will be understated. - expenses will be understated and revenues will be understated. - liabilities will be understated and equity will be understated.

liabilities will be understated and its expenses will be understated.

If the year-end adjusting entry to record salaries owed to employees were omitted then - retained earnings would be correctly stated. - expenses would be overstated. - stockholders' equity would be understated. - liabilities would be understated. - assets would be understated.

liabilities would be understated.

If the year-end adjusting entry to record salaries owed to employees were omitted then - retained earnings would be correctly stated. - liabilities would be understated. - assets would be understated. - expenses would be overstated. - stockholders' equity would be understated.

liabilities would be understated.

Payments from customers received before performing services for the customers are recorded as - liabilities. - equity. - expenses. - revenues. - dividends.

liabilities.

McMaster Company's depreciation in the current year is $800. The company's accountant recorded the year-end adjusting entry for depreciation as a debit to Depreciation Expense for $800 and a credit to Cash for $800. The company's - net income and total assets will be understated by $800. - net income and total assets will be correctly stated. - net income and total assets will be overstated by $800. - net income will be correctly stated but total assets will be overstated by $800. - net income will be correctly stated but total assets will be understated by $800.

net income and total assets will be correctly stated.

During the adjusting process two transactions were neglected or omitted. The first is for unearned rent revenue of which $415 was earned during the period, the second was for accrued interest payable of which $275 is owed for the period. As a result of these omissions - liabilities are overstated by $690. - revenue is understated by $415. - expenses are overstated by $415. - These omissions would not affect the financial statements; the financial statements will be correct. - net income is overstated by $140.

revenue is understated by $415. Liabilities are overstated by $140 (i.e., 415 - 275 = 140).

In Year 1, Costello Company performed work for a customer and billed the customer $14,000. In Year 2, the customer pays Costello Company for the services it rendered in Year 1. In Year 1, the company incurred $6,000 of wage expense, but it did not pay the employees until Year 2. If Costello Company uses the accrual-basis of accounting, then it will report

revenue of $14,000 and expense of $6,000 in Year 1.

In Year 1, Costello Company performed work for a customer and billed the customer $14,000. In Year 2, the customer pays Costello Company for the services it rendered in Year 1. In Year 1, the company incurred and paid $6,000 of wage expense. If Costello Company uses the accrual-basis of accounting, then it will report

revenue of $14,000 and expense of $6,000 in Year 1.

In Year 1, Costello Company performed work for a customer and billed the customer $14,000. In Year 2, the customer pays Costello Company for the services it rendered in Year 1. In Year 1, the company incurred and paid $6,000 of wage expense. If Costello Company uses the cash-basis of accounting, then it will report - revenue of $14,000 and expense of $6,000 in Year 2. - revenue of $14,000 in Year 2 and expense of $6,000 in Year 1. - revenue of $14,000 and expense of $6,000 in Year 1. - revenue of $14,000 in Year 1 and expense of $6,000 in Year 2. - no revenue and no expense in either year.

revenue of $14,000 in Year 2 and expense of $6,000 in Year 1.

A company uses accrual-basis accounting. Shortly before the end of the current year, the company earned $1,000 by providing services to a customer but the customer does not pay the company until the following year. Nothing is recorded regarding these events, including year-end adjusting entries. This omission would cause the company's current year - net income to be overstated. - stockholders' equity to be overstated. - assets to be overstated. - liabilities to be understated. - revenues to be understated.

revenues to be understated.

A company uses accrual-basis accounting. Shortly before the end of the current year, the company earned $1,000 by providing services to a customer but the customer does not pay the company until the following year. Nothing is recorded regarding these events, including year-end adjusting entries. This omission would cause the company's current year - revenues to be overstated. - stockholders' equity to be understated. - retained earnings to be overstated. - liabilities to be understated. - assets to be overstated.

stockholders' equity to be understated.

A certain company debited prepaid insurance when it paid for a one-year insurance policy. If the company does not record any year-end adjusting entries then - nothing would be over or understated. - expenses would be overstated. - assets would be understated. - liabilities would be understated. - stockholders' equity would be overstated.

stockholders' equity would be overstated.

A certain company debited prepaid insurance when it paid for a one-year insurance policy. If the company does not record any year-end adjusting entries then - stockholders' equity would be overstated. - expenses would be overstated. - liabilities would be understated. - assets would be understated. - nothing would be over or understated.

stockholders' equity would be overstated.