Question 1

Recognizing that Salaries and Wages Payable (resulting from adjustments at the end of the period) will be paid in a future period,what will be the effect on the accounts when the salaries and wages are paid?

Accepted Answer

A)  Salaries and Wages Expense will increase and Cash will decrease.
B)  Salaries and Wages Payable will decrease and Cash will decrease.
C)  Salaries and Wages Expense will increase and Salaries and Wages Payable will decrease.
D)  Salaries and Wages Expense will decrease and Cash will decrease.E) B) and C)
F) None of the above

Question 2

Which of the following statements about adjustments is not correct?

Accepted Answer

A)  Adjusting entries affect the cash account.
B)  Adjustments to prepaid expenses and deferred revenues are deferral adjustments.
C)  Adjustments for wages and income taxes are normally accrual adjustments.
D)  Adjusting entries always involve one income statement account and one balance sheet account.E) C) and D)
F) None of the above

Question 3

What are the effects on the accounting equation from the adjustment for income tax expense accrued,but not paid,at the end of the accounting period?

Accepted Answer

A)  Total liabilities will decrease and total stockholders' equity will decrease.
B)  Total liabilities will increase and total stockholders' equity will decrease.
C)  Total liabilities will decrease and total stockholders' equity will increase.
D)  Total liabilities will increase and total stockholders' equity will increase.E) A) and B)
F) A) and D)

Question 4

Which of the following statements is correct regarding the adjustment to record interest accrued on a note payable?

Accepted Answer

A)  Interest on the note payable is classified as an expense since it is a cost of borrowing.
B)  Interest on a note payable should be credited to Notes Payable because it increases the amount of principal to be repaid at the maturity of the note.
C)  Interest on the note payable is classified as revenue since it is an amount that can be earned on investments.
D)  Interest on the note payable will not accumulate because it is paid at the end of each year.E) A) and B)
F) A) and C)

Question 5

At the end of the year,accrual adjustments could include a:

Accepted Answer

A)  debit to an expense and a credit to an asset.
B)  credit to revenue and a debit to an expense.
C)  debit to cash and a credit to Common Stock.
D)  debit to an asset and a credit to a revenue.E) A) and B)
F) A) and C)

Question 6

Accrued revenues recorded at the end of the current year:

Accepted Answer

A)  often result in cash receipts from customers in the next period.
B)  often result in cash payments in the next period.
C)  are also called Deferred Revenues.
D)  are recorded in the current year when cash is received.E) A) and B)
F) B) and C)

Question 7

If adjustments to the financial statements were not made,what would be the effect on the financial results?

Accepted Answer

A)  The financial statements would present an incomplete and misleading picture of the company's financial performance.
B)  There would be little effect because any items not recognized in the reporting period would be recognized in the next reporting period.
C)  No effect would result because adjustments do not reflect cash paid or received.
D)  There would be no effect because some adjustments increase net income and others decrease it,cancelling each other out.E) B) and C)
F) A) and B)

Question 8

Which of the following statements about the presentation of a trial balance is correct?

Accepted Answer

A)  The adjusted trial balance shows the end-of-year balance for Retained Earnings.
B)  An adjusted trial balance presents account balances in the same level of detail as in the presentation of the financial statements.
C)  The order of accounts on a trial balance is as follows: assets,liabilities,stockholders' equity,dividends,revenues,and expenses.
D)  The adjusted trial balance shows all the debit and credit postings to all the ledger accounts.E) A) and C)
F) B) and C)

Question 9

Match the term and its definition.There are more definitions than terms.
-Contra-Account

Accepted Answer

A)  Also known as balance sheet accounts.
B)  Lists the balances of all temporary and permanent accounts to provide a check on the equality of the debits and credits.
C)  Lists the balances of all accounts to check that revenues equal expenses.
D)  The level of profit prior to considering income tax.
E)  An account that is paired with another account and acts to reduce its book value.F) Converts some of an asset's or a liability's book value into an expense or a revenue.G) An account that must have a zero balance after closing entries have been made.H) Adds new values into the balance sheet and income statement accounts.I) The amount at which an asset or liability is reported in the financial statements.J) Lists the balances of all permanent accounts to check that debits equal credits.K) A journal entry that transfers net income or loss to the Retained Earnings account.L) When revenue minus expenses is a negative number.M) Entries made to update existing accounts and record new events.N) F) and I)
O) E) and I)

Question 10

Which of the following statements about revenues and expenses is correct?

Accepted Answer

A)  If revenues are less than expenses,the company has a net loss and Retained Earnings decreases.
B)  If revenues are greater than expenses,the company has net income and Common Stock increases.
C)  If revenues are less than expenses,the company has a net loss and Common Stock increases to balance off the loss.
D)  If revenues are greater than expenses,the company has net income and Retained Earnings decreases.E) A) and D)
F) None of the above

Question 11

Receipt of a prepayment from a customer is originally recorded as a liability.Later,at the end of the accounting period,an adjustment is recorded causing a(n) ________ in the liability account and a(n) ________ in the revenue account.

Accepted Answer

A)  increase;increase
B)  increase;decrease
C)  decrease;decrease
D)  decrease,increaseE) B) and C)
F) A) and B)

Question 12

Litt,Inc.had income before income tax of $229,600 last quarter and a 34% tax rate.What is the company's net income?

Accepted Answer

A)  $78,064
B)  $151,536
C)  $307,664
D)  $675,294E) All of the above
F) B) and C)

Question 13

One type of deferral adjustment reduces the balance in a(n) ________ account on the balance sheet and transfers that reduction into a(n) ________ account on the income statement.

Accepted Answer

A)  asset;expense
B)  asset;revenue
C)  liability;expense
D)  liability;assetE) A) and D)
F) B) and C)

Question 14

The purpose of recording an adjusting entry for salaries and wages is to record wages:

Accepted Answer

A)  incurred but not yet paid.
B)  paid during the accounting period.
C)  paid in the prior accounting period.
D)  to be incurred in the next accounting period.E) A) and D)
F) All of the above

Question 15

Which is the first financial statement that should be prepared after the adjusted trial balance has been prepared?

Accepted Answer

A)  Balance Sheet
B)  Income Statement
C)  Statement of Cash Flows
D)  Statement of Retained EarningsE) B) and C)
F) B) and D)

Question 16

A company makes a deferral adjustment that increased a revenue account.This must mean that a(n) :

Accepted Answer

A)  expense account was decreased by the same amount.
B)  expense account was increased by the same amount.
C)  liability account was decreased by the same amount.
D)  asset account was decreased by the same amount.E) A) and B)
F) A) and C)

Question 17

The adjusted trial balance should be prepared before the ________ are prepared in order to prove the equality of ________.

Accepted Answer

A)  financial statements;debits and credits
B)  adjusting entries;debits and credits
C)  adjusting entries;assets and liabilities
D)  financial statements;assets and liabilitiesE) C) and D)
F) B) and C)

Question 18

How do deferral adjustments for prepaid expenses (e.g. ,rent) that were initially recorded as assets affect assets on the balance sheet and expenses on the income statement?

Accepted Answer

A)  Deferral adjustments increase assets and increase expenses.
B)  Deferral adjustments increase assets and decrease expenses.
C)  Deferral adjustments decrease assets and decrease expenses.
D)  Deferral adjustments decrease assets and increase expenses.E) All of the above
F) C) and D)

Question 19

In an accrual adjustment for expenses incurred but not yet paid:

Accepted Answer

A)  a liability is decreasing since cash is being paid for an expense incurred at the time of the adjustment.
B)  the liability recorded when cash was received is increasing as the expense is incurred.
C)  the liability recorded when cash was received is decreasing as the expense is incurred.
D)  a liability is increasing since cash will be paid in the future due to the expense incurred.E) A) and C)
F) A) and B)

Question 20

The adjusting entry to record services earned but not yet billed requires:

Accepted Answer

A)  a debit to Accounts Receivable and credit to Service Revenue.
B)  a debit to Service Revenue and credit to Accounts Receivable.
C)  a debit to Accounts Payable and credit to Service Revenue.
D)  no entry since revenues should not be recorded until collected.E) A) and B)
F) A) and C)

Exam 4: Adjustments,Financial Statements,and Financial Results

Litt,Inc.had income before income tax of $229,600 last quarter and a 34% tax rate.What is the company's net income?

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What are the effects on the accounting equation from the adjustment for income tax expense accrued,but not paid,at the end of the accounting period?

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The adjusting entry to record services earned but not yet billed requires:

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The purpose of recording an adjusting entry for salaries and wages is to record wages:

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Receipt of a prepayment from a customer is originally recorded as a liability.Later,at the end of the accounting period,an adjustment is recorded causing a(n) ________ in the liability account and a(n) ________ in the revenue account.

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Which is the first financial statement that should be prepared after the adjusted trial balance has been prepared?

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The adjusted trial balance should be prepared before the ________ are prepared in order to prove the equality of ________.

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One type of deferral adjustment reduces the balance in a(n) ________ account on the balance sheet and transfers that reduction into a(n) ________ account on the income statement.

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If adjustments to the financial statements were not made,what would be the effect on the financial results?

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Accrued revenues recorded at the end of the current year:

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How do deferral adjustments for prepaid expenses (e.g. ,rent) that were initially recorded as assets affect assets on the balance sheet and expenses on the income statement?

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In an accrual adjustment for expenses incurred but not yet paid:

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Which of the following statements about the presentation of a trial balance is correct?

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A company makes a deferral adjustment that increased a revenue account.This must mean that a(n) :

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Which of the following statements about revenues and expenses is correct?

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Match the term and its definition.There are more definitions than terms. -Contra-Account

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Recognizing that Salaries and Wages Payable (resulting from adjustments at the end of the period) will be paid in a future period,what will be the effect on the accounts when the salaries and wages are paid?

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Which of the following statements is correct regarding the adjustment to record interest accrued on a note payable?

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At the end of the year,accrual adjustments could include a:

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Which of the following statements about adjustments is not correct?

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Receipt of a prepayment from a customer is originally recorded as a liability.Later,at the end of the accounting period,an adjustment is recorded causing a(n) in the liability account and a(n) in the revenue account.

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The adjusted trial balance should be prepared before the are prepared in order to prove the equality of .

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One type of deferral adjustment reduces the balance in a(n) account on the balance sheet and transfers that reduction into a(n) account on the income statement.

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