Question 1

Which is the first financial statement that should 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) C) and D)
F) A) and C)

Question 2

At the beginning of its first year of operations,Henry Corp.purchased $5,000 of supplies,which were debited to the Supplies account.It did not purchase any other supplies during the year.At the end of the year,it has $1,000 of supplies left.The appropriate adjusting journal entry is:

Accepted Answer

A)   Debit Supplies Expense $4,000 and credit Supplies $4,000
B)   Debit Supplies $4,000 and credit Supplies Expense $4,000
C)   Debit Supplies $1,000 and credit Supplies Expense $1,000
D)   Debit Supplies Expense $1,000 and credit Supplies $1,000E) B) and C)
F) None of the above

Question 3

Which of the following statements about the Dividends account is not correct?

Accepted Answer

A)   It has a debit balance.
B)   It reduces Retained Earnings.
C)   It is an expense.
D)   It is an account that is reported only on the statement of retained earnings.E) A) and C)
F) A) and B)

Question 4

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 unearned revenues are deferral adjustments.
C)   Adjustments for wages and income taxes are normally accrual adjustments. .
D)   Adjusting entries involve one income statement account and one balance sheet account.E) A) and D)
F) All of the above

Question 5

Which line item is reported on both the income statement and statement of retained earnings?

Accepted Answer

A)   Net Income
B)   Revenues
C)   Expenses
D)   DividendsE) A) and D)
F) B) and C)

Question 6

Assume that no dividends were declared during the current year.Which of the following statements about the effect of a net loss on the closing process is correct?

Accepted Answer

A)   If a company has a net loss during the current accounting period, then the ending Retained Earnings will be smaller than the beginning Retained Earnings.
B)   When closing entries are prepared, Common Stock is debited if a company has a net loss.
C)   If a company has a net loss, the closing entry will include debits to the revenue accounts, credits to the expense accounts, and a credit to Retained Earnings.
D)   If a company has a net loss, the amount of revenues to be closed will be greater than the amount of expenses to be closed in the closing process.E) None of the above
F) B) and C) A

Question 7

Lisa and Charlie operate a yacht maintenance service that they incorporated as Reliable Yacht Repair,Inc.They recently talked to their banker about obtaining a loan.The banker has requested their most recent financial statements prepared in accordance with GAAP.Lisa and Charlie are unsure of how to proceed and ask you for advice.You asked for their most recent unadjusted trial balance,which follows:
  
Required:
Review the unadjusted trial balance and identify the accounts that might require adjustment at June 30,2015.Then,describe what information you would need in order to determine the nature and amount of the adjusting entry for each of the accounts identified.

Accepted Answer

Accounts which might require adjustment ...

Question 8

Permanent accounts are found on:

Accepted Answer

A)   only the balance sheet
B)   the income statement
C)   both the balance sheet and the income statement
D)   none of the financial statementsE) All of the above
F) C) and D) A

Question 9

Which of the following statements about the closing process is correct?

Accepted Answer

A)   Closing entries are recorded at the end of each reporting period which could be monthly, quarterly or annually.
B)   After closing entries are posted, the balances of the income statement accounts will be zero.
C)   Closing entries are made to zero out the balances of the permanent accounts on the balance sheet.
D)   After closing entries are posted, the only temporary account with a balance is the Dividends account.E) B) and C)
F) None of the above

Question 10

After net income has been determined,it is then transferred to the:

Accepted Answer

A)   balance sheet.
B)   income statement.
C)   statement of cash flows.
D)   statement of retained earnings.E) B) and D)
F) B) and C)

Question 11

The adjustment for supplies used during the period will result in a debit to the ______ account and a credit to the ______ account.

Accepted Answer

A)   Supplies Expense; Supplies
B)   Inventory; Cost of Goods Sold
C)   Supplies; Supplies Expense
D)   Cost of Goods Sold; RevenueE) A) and B)
F) None of the above

Question 12

Which of the following statements about adjustments is correct?

Accepted Answer

A)   An accrual adjustment that increases an asset will include an increase in an expense.
B)   A deferral adjustment that decreases an asset will include an increase in an expense.
C)   An accrual adjustment that increases an expense will include an increase in assets.
D)   A deferral adjustment that increases a contra account will include an increase in an asset.E) A) and B)
F) A) and C)

Question 13

On December 16,2015,B.Darin Company received $3,600 from S.Dee Company for rent of an office owned by B.Darin Company.The payment covers the period from December 16,2015 through February 15,2016.B.Darin Company recorded this as Unearned Rent when it was received on December 16.The adjusting entry on December 31 would include a:

Accepted Answer

A)   credit to Rent Revenue of $900.
B)   credit to Unearned Rent Revenue of $900.
C)   debit to Rent Revenue of $1,800.
D)   debit to Unearned Rent Revenue of $1,800.E) None of the above
F) A) and B)

Question 14

What is the main difference between accrual and deferral adjustments?

Accepted Answer

A)   Deferral adjustments are required to update previously recorded items whereas accrual adjustments are required to include items not previously recorded.
B)   Deferral adjustments are required under the cash basis of accounting whereas accrual adjustments are required under the accrual basis of accounting.
C)   Deferral adjustments are required to include items not previously recorded whereas accrual adjustments are required to update previously recorded items.
D)   Deferral adjustments are used for expenses whereas accrual adjustments are used for revenues.E) C) and D)
F) B) and D)

Question 15

Depreciation is a measure of the decline in market value of an asset.

Accepted Answer

A) True 
 B)False

Question 16

What is the effect of the adjusting entry for depreciation on the accounting equation?

Accepted Answer

A)   No effect on assets; Decrease liabilities; Increase stockholders' equity
B)   Decrease assets; No effect on liabilities; Decrease stockholders' equity
C)   Increase assets; No effect on liabilities; Increase stockholders' equity
D)   Decrease assets; Decrease liabilities; No effect on stockholders' equityE) C) and D)
F) A) and C)

Question 17

One of the major advantages of making adjustments in order to improve the quality of financial statements is that they:

Accepted Answer

A)   ensure that revenues and expenses are recognized during the period they are earned and incurred.
B)   ensure that all estimates of future activities are eliminated from consideration.
C)   ensure that revenues and expenses are recognized conservatively during the period in which they are paid.
D)   provide an opportunity to manipulate the numbers to the best advantage of the reporting company.E) B) and C)
F) A) and D)

Question 18

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 D)
F) All of the above

Question 19

On April 30,2016,Rudolph Inc.purchased a three-year insurance policy with a cash payment of $18,000.Coverage began immediately.
Required:
Part a.What is the amount of Insurance Expense relating to this insurance policy that will be reported for the year ended December 31,2016?
Part b.What is the balance of the Prepaid Insurance account at December 31,2016?

Accepted Answer

Part a
Monthly insurance cost = $18,000 ÷ 36 months = $500 per month
Eight months of coverage (May through December)occurred during 2016
Insurance Expense for 2016 = $500 x 8 = $4,000
Part b
Ending Prepaid Insurance = Beginning Prepaid Insurance + Prepayment - Expired portion
= $0 +$18,000 - $4,000 (from part a)= $14,000
Alternatively:
28 months of coverage (January 2017 through March 2019)is unexpired at December 31,2016
Ending balance = Cash payment x Unexpired portion
= $18,000 x 28/36 = $14,000

Question 20

The table below includes some of the accounts that are included on a company's chart of accounts.
Required:
For each of the accounts listed,identify whether the account is a temporary (T)or a permanent (P)account.Then,indicate whether the account will be closed with a debit (Dr)or credit (Cr)or whether it will not be closed (NC).

Accepted Answer

The answer of The table below includes some of the...

Exam 4: Adjustments,financial Statements,and Financial Results

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

Correct Answer
verified

At the beginning of its first year of operations,Henry Corp.purchased $5,000 of supplies,which were debited to the Supplies account.It did not purchase any other supplies during the year.At the end of the year,it has $1,000 of supplies left.The appropriate adjusting journal entry is:

Correct Answer
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Which of the following statements about the Dividends account is not correct?

Correct Answer
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Which of the following statements about adjustments is not correct?

Correct Answer
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Which line item is reported on both the income statement and statement of retained earnings?

Correct Answer
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Assume that no dividends were declared during the current year.Which of the following statements about the effect of a net loss on the closing process is correct?

Correct Answer
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A

Correct Answer
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Accounts which might require adjustment ...
View Answer

Permanent accounts are found on:

Correct Answer
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A

Which of the following statements about the closing process is correct?

Correct Answer
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After net income has been determined,it is then transferred to the:

Correct Answer
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The adjustment for supplies used during the period will result in a debit to the account and a credit to the account.

Correct Answer
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Which of the following statements about adjustments is correct?

Correct Answer
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Correct Answer
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What is the main difference between accrual and deferral adjustments?

Correct Answer
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Depreciation is a measure of the decline in market value of an asset.

Correct Answer
verified

What is the effect of the adjusting entry for depreciation on the accounting equation?

Correct Answer
verified

One of the major advantages of making adjustments in order to improve the quality of financial statements is that they:

Correct Answer
verified

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?

Correct Answer
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Correct Answer
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Exam 4: Adjustments,financial Statements,and Financial Results

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

Correct AnswerverifiedShow Answer

At the beginning of its first year of operations,Henry Corp.purchased $5,000 of supplies,which were debited to the Supplies account.It did not purchase any other supplies during the year.At the end of the year,it has $1,000 of supplies left.The appropriate adjusting journal entry is:

Correct AnswerverifiedShow Answer

Which of the following statements about the Dividends account is not correct?

Correct AnswerverifiedShow Answer

Which of the following statements about adjustments is not correct?

Correct AnswerverifiedShow Answer

Which line item is reported on both the income statement and statement of retained earnings?

Correct AnswerverifiedShow Answer

Assume that no dividends were declared during the current year.Which of the following statements about the effect of a net loss on the closing process is correct?

Correct AnswerverifiedA

Correct AnswerverifiedAccounts which might require adjustment ...View AnswerShow Answer

Permanent accounts are found on:

Correct AnswerverifiedA

Which of the following statements about the closing process is correct?

Correct AnswerverifiedShow Answer

After net income has been determined,it is then transferred to the:

Correct AnswerverifiedShow Answer

The adjustment for supplies used during the period will result in a debit to the ______ account and a credit to the ______ account.

Correct AnswerverifiedShow Answer

Which of the following statements about adjustments is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What is the main difference between accrual and deferral adjustments?

Correct AnswerverifiedShow Answer

Depreciation is a measure of the decline in market value of an asset.

Correct AnswerverifiedShow Answer

What is the effect of the adjusting entry for depreciation on the accounting equation?

Correct AnswerverifiedShow Answer

One of the major advantages of making adjustments in order to improve the quality of financial statements is that they:

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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A

Correct Answer
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Accounts which might require adjustment ...
View Answer

Correct Answer
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A

Correct Answer
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Correct Answer
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The adjustment for supplies used during the period will result in a debit to the account and a credit to the account.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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