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Exam 3: The Adjusting Process

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Question 31

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Generally accepted accounting principles require accrual-basis accounting.

A) True
B) False

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Question 32

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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?

A) debit Insurance Expense, $3,000; credit Prepaid Insurance, $3,000
B) debit Insurance Expense, $14,000; credit Prepaid Insurance, $14,000
C) debit Prepaid Insurance, $11,000; credit Insurance Expense, $11,000
D) debit Insurance Expense, $11,000; credit Prepaid Insurance, $11,000

E) B) and D)
F) A) and C)

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Question 33

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

Classify the following items as: (1) prepaid expense, (2) unearned revenue, (3) accrued expense, or (4) accrued revenue.

Explain the difference between accrual basis accounting and cash basis accounting.

On January 1st, Power House Co. prepays the year's rent, $10,140 to its landlord. Prepare the journal entry by recording the prepayment to an asset account.

The adjustment for accrued fees was debited to Accounts Payable instead of Accounts Receivable. This error will be detected when the Adjusted Trial Balance is prepared.

A one-year insurance policy was purchased on October 1, 2011 for $4,200. The adjusting entry on December 31, 2010 would be:

A company pays an employee $3,000 for a five day work week, Monday - Friday. The adjusting entry on December 31, which is a Wednesday, is debit Wages Expense, $1,800 and credit Wages Payable, $1,800.

Protonix Corp has a payroll of $8,000 for a five-day workweek. Its employees are paid each Friday for the five-day workweek. The adjusting entry on December 31, 2015 assuming the year ends on Thursday would be:

The financial statements are prepared from the unadjusted trial balance.

Under the accrual basis, some accounts in the ledger require updating. Discuss the three main reasons for this updating and give an example of each.

For each of the following errors, considered individually, indicate whether the error would cause the adjusted trial balance totals to be unequal. If the error would cause the adjusted trial balance total to be unequal, indicate whether the debit or credit total is higher and by how much.

Two income statements for PS Enterprises are shown below: Prepare a vertical analysis of PS Enterprises' income statements. Has operating income increased or decreased as a percentage of revenue?

A business pays weekly salaries of $25,000 on Friday for a five-day week ending on that day. The adjusting entry necessary at the end of the fiscal period ending on Tuesday is

Which of the accounting steps in the accounting process below would be completed last?

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

Deferred revenue is revenue that is

At the end of the fiscal year, the usual adjusting entry to Prepaid Insurance to record expired insurance was omitted. Which of the following statements is true?

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?