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Exam 3: The Adjusting Process

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Question 31

Multiple Choice

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As time passes, fixed assets other than land lose their capacity to provide useful services. To account for this decrease in usefulness, the cost of fixed assets is systematically allocated to expense through a process called

A) equipment allocation
B) depreciation
C) accumulation
D) matching

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Question 32

Multiple Choice

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Identify the effect a-h) that omitting each of the following items would have on the balance sheet. -An attorney has earned 1/2 of a retainer fee that was received and recorded last month. No adjustment was recorded for the amount earned.

A) Assets and stockholders' equity overstated
B) Assets and stockholders' equity understated
C) Assets overstated and stockholders' equity understated
D) Assets understated and stockholders' equity overstated
E) Liabilities and stockholders' equity overstated
F) Liabilities and stockholders' equity understated
G) Liabilities overstated and stockholders' equity understated
H) Liabilities understated and stockholders' equity overstated

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Question 33

Multiple Choice

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Supplies are recorded as assets when purchased. Therefore, the credit to Supplies in the adjusting entry is for the amount of supplies

For each of the following, journalize the necessary adjusting entry: a) A business pays weekly salaries of $22,000 on Friday for a five-day week ending on that day. Journalize the necessary adjusting entry at the end of the fiscal period, assuming that the fiscal period ends 1) on Tuesday, 2) on Wednesday. b) The balance in the prepaid insurance account before adjustment at the end of the year is $18,000. Journalize the adjusting entry required under each of the following alternatives: 1) the amount of insurance expired during the year is $5,300, 2) the amount of unexpired insurance applicable to a future period is $2,700. c) On July 1 of the current year, a business pays $54,000 to the city for license taxes for the coming fiscal year. The same business is also required to pay an annual property tax at the end of the year. The estimated amount of the current year's property tax allocated to July is $4,800. 1) Journalize the two adjusting entries required to bring the accounts affected by the taxes up to date as of July 31. 2) What is the amount of tax expense for July? d) The estimated depreciation on equipment for the year is $32,000.

Prior to the adjusting process, accrued revenue has

Data for an adjusting entry described as "accrued wages, $2,020" requires a

A company realizes that the last two days' revenue for the month was billed but not recorded. The adjusting entry on December 31 is a debit to Accounts Receivable and a credit to Fees Earned.

A company receives $360 for a 12-month trade magazine subscription on August 1. The adjusting entry on December 31 is a debit to Unearned Subscription Revenue, $150, and credit to Subscription Revenue, $150.

All of the following statements regarding vertical analysis are true except

Which of the following is the proper adjusting entry, based on a prepaid insurance account balance before adjustment of $14,000 and unexpired insurance of $3,000, for the fiscal year ending on April 30?

Accrued salaries of $600 owed to employees for December 29, 30, and 31 are not taken into consideration in preparing the financial statements for the year ended December 31. Indicate which items will be erroneously stated, because of the error, on a) the income statement for the year and b) the balance sheet as of December 31. Also indicate whether the items in error will be overstated or understated.

What is the purpose of the adjusted trial balance?

The estimated amount of depreciation on equipment for the current year is $5,300. Journalize the adjusting entry to record the depreciation.

Which of the following is an example of a prepaid expense?

At year-end, the balance in the prepaid insurance account, prior to any adjustments, is $6,000. The amount of the journal entry required to record insurance expense will be $4,000 if the amount of unexpired insurance applicable to future periods is $2,000.

A company pays $36,000 for twelve months' rent on October 1, recording the prepayment as an asset. The adjusting entry on December 31 is a debit to Rent Expense, $9,000, and a credit to Prepaid Rent, $9,000.

An adjusting entry to accrue an incurred expense will affect total liabilities.

The matching concept supports matching expenses with the related revenues.

On January 2, Dog Mart prepaid $30,000 rent for the year and recorded the prepayment in an asset account. Prepare the January 31 adjusting entry for rent expense.

If there is a balance in the unearned subscriptions account after adjusting entries are made, it represents an)