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Exam 3: The Adjusting Process

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Question 101

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Smokey Company purchases a one-year insurance policy on July 1 for $3,600. The adjusting entry on December 31 is

A) debit Insurance Expense, $1,800; credit Prepaid Insurance, $1,800
B) debit Insurance Expense, $1,500; credit Prepaid Insurance, $1,500
C) debit Insurance Expense, $2,100; credit Prepaid Insurance, $2,100
D) debit Prepaid Insurance, $1,800; credit Cash, $1,800

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

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Question 102

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If the debit portion of an adjusting entry is to an asset account, then the credit portion must be to a liability account.

A) True
B) False

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Question 103

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Zoey Bella Corp. has a payroll of $10,000 for a five-day workweek. Its employees are paid each Friday for the five-day workweek. Prepare the adjusting entry on December 31 assuming the year ends on Thursday.​

On March 1, a business paid $3,600 for a twelve-month liability insurance policy. On April 1, the business entered into a two-year rental contract for equipment at a total cost of $18,000. Determine the following amounts: (a) insurance expense for the month of March (b) balance in prepaid insurance as of March 31 (c) equipment rent expense for the month of April (d) balance in prepaid equipment rental as of April 30

Generally accepted accounting principles require that companies use the ____ of accounting.

DogMart Company records depreciation for equipment. Depreciation for the period ending December 31 is $1,400 for office equipment and $2,650 for production equipment. Prepare the two entries to record the depreciation.

Which account would normally not require an adjusting entry?

Which of the following is not a characteristic of the accrual basis of accounting?

For most large businesses, the cash basis of accounting will provide accurate financial statements for user needs.

If the effect of the debit portion of an adjusting entry is to increase the balance of an expense account, which of the following describes the effect of the debit portion of the entry?

Which of the accounts below would most likely appear on an adjusted trial balance but probably would not appear on the unadjusted trial balance?

The following adjusting journal entry found in the journal is missing an explanation. Select the best explanation for the entry.

If the effect of the credit portion of an adjusting entry is to increase the balance of a revenue account, which of the following describes the effect of the debit portion of the entry?

The following adjusting journal entry does not include an explanation. Select the best explanation for the entry.

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

Depreciation on an office building is $2,800. The adjusting entry on December 31 would be

Using the following account balances for Garry's Tree Service, prepare a trial balance.​

The following adjusting journal entry does not include an explanation. Select the best explanation for the entry.

Match the type of account (a - e) with the business transactions that follow. -Annual property taxes that are paid at the end of the year. A)Prepaid expense B)Accrued expense C)Unearned revenue D)Accrued revenue E)None of these

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.