Adjusting Entries #3 Quick Test

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1. When a company prepares an adjusting entry to accrue an expense, which type of account is usually credited?
2. When a company prepares an adjusting entry to decrease the balance in the account Prepaid Insurance, which type of account is usually debited?
3. When a company prepares an adjusting entry to decrease the balance in the account Prepaid Insurance, which type of account should be credited?
4. When a company prepares an adjusting entry to accrue revenues, which type of account is usually debited?
5. When a company prepares an adjusting entry to accrue revenues, which type of account should be credited?
6. When a company prepares an adjusting entry to decrease the balance in the account Unearned Revenues or Deferred Revenues, which type of account should be debited?
7. What type of accounts are Unearned Revenues and Deferred Revenues?
8. On December 20, Jay Corporation received $5,000 from a new customer as a down payment for services that Jay Corporation will provide in January. On December 20 Jay Corporation debited Cash for $5,000 and credited another account. In what type of account should the credit of $5,000 be reported on December 31.
9. A credit balance in a company’s Unearned Fees account should indicate which of the following?
10. A credit balance in a company’s Accumulated Depreciation account usually indicates which of the following?
11. A credit balance in the account Allowance for Doubtful Accounts should indicate which of the following?
12. On December 20, a company recorded in its Accounts Payable account a vendor’s invoice for repair work that had been completed, approved, and scheduled for payment on January 10. Should the company prepare a December 31 accrual adjusting entry for this repair?
13. A corporation issued its balance sheet without an accrual adjusting entry for the interest expense it had incurred but had not yet recorded. What section of the balance sheet will have a total that is too small because the adjusting entry was omitted?
14. A corporation issued its balance sheet without an accrual adjusting entry for the interest expense it had incurred but had not yet recorded. What section of the balance sheet will have a total that is too large because the adjusting entry was omitted?
15. A corporation issued its balance sheet without an accrual adjusting entry for the interest it had earned on an investment but had not yet recorded. Will there be a problem with the reported amount of current assets?
16. A corporation issued its balance sheet without an accrual adjusting entry for the interest it had earned but had not yet recorded. Will there be a problem with the reported amount of stockholders’ equity?
17. A corporation issued its balance sheet without recording the depreciation expense for the accounting period. Will there be a problem with the reported amount of total assets?
18. If the adjusting entry to record depreciation expense is not made as of December 31, will there be a problem with the reported amount of stockholders’ equity as of December 31?
19. A corporation failed to adjust its account Allowance for Doubtful Accounts for some receivables that are unlikely to be collected in full. What will be the problem with the total amount of current assets reported on the balance sheet?
20. Which of the following is more likely to require an accrual adjusting entry at the end of an accounting period?
21. The wages and/or salaries of which employees are more likely to need an accrual adjusting entry before the company issues its financial statements?
22. What type of adjusting entry is more likely to be involved when a company records the vacation pay that its employees have earned but have not yet taken?
Use the following information for Questions 23 - 24:
A company correctly recorded an accrual adjusting entry on December 31 for $2,000 of interest expense that it had incurred but had not yet recorded. The company uses reversing entries for all accruals.
23. Which date is more appropriate for the reversing entry?
24. The reversing entry will debit which of the following accounts?
Use the following information for Questions 25 - 28:
Supplies are a significant expense and a significant asset of a local mail order business. At the beginning of the year, its account Supplies Inventory reported a cost of $12,000. During the year the business purchased additional supplies at a cost of $140,000 and recorded these in the account Supplies Expense. At the end of the year, a physical count indicated that the supplies on hand had a cost of $15,000.
25. What amount should be reported as the end-of-the-year balance in the account Supplies Inventory?
26. What should be the debit part of the adjusting entry dated December 31?
27. What should be the credit part of the adjusting entry dated December 31?
28. What amount of Supplies Expense should be reported for the year?
Use the following information for Questions 29 - 31:
On December 27, a company paid $12,000 for a one-year service contract that will begin on January 1. On the date of the payment the company debited Prepaid Service Contract for $12,000 and credited Cash for $12,000.
29. Which of the following should be credited in the adjusting entry dated January 31?
30. Which of the following should be debited in the adjusting entry dated January 31?
31. Which of the following should be reported as the ending balance in a current asset as of November 30 of the contract year?
Use the following information for Questions 32 - 35:
Prior to recording its December 31 adjusting entries, a company's Accounts Receivable had a debit balance of $238,000. Its Allowance for Doubtful Accounts had a credit balance of $3,000. An aging of accounts receivable indicates that approximately $14,000 will not be collected.
32. Since the company is using the allowance method, which general ledger account should be debited in the December 31 adjusting entry?
33. What account should be credited in the December 31 adjusting entry?
34. What amount should be used in the December 31 adjusting entry?
35. If a company estimates that its uncollectible accounts receivable will be $14,000 and its Allowance for Doubtful Accounts has a debit balance of $3,000. What will be the amount of the December 31 adjusting entry?
Use the following information for Questions 36 - 37:
A website design company required a new client to prepay $10,000 in December before it begins work for the client on January 2. The company recorded the client's $10,000 payment on December 28 with a debit to Cash and a credit to Unearned Fees. In January, the company completed 40% of the work that was covered by the prepayment.
36. Which of the following should be included in the website design company’s January 31 adjusting entry?
37. What should be the ending balance in the account Unearned Fees as of January 31?
38. Which of the following better describes the purpose of depreciation?
39. The adjusting entry to record depreciation of equipment will include a credit to which of the following accounts?
40. A company purchased real estate consisting of land and a building for a total cost of $300,000. If the land is estimated to be 20% of the real estate’s value, the company’s total depreciation expense throughout the life of the real estate should not exceed what amount?

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