College Accounting John Price 15e – Test Bank

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Sample Questions Are Posted Below

Chapter 05 Adjustments and the Worksheet

MULTIPLE CHOICE QUESTIONS

Prepaid expenses, such as prepaid rent and prepaid insurance, represent assets for a business until they are

A) True

False

Answer: A Explanation:

Diff: 1

Topic: The Worksheet

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

The cost of a long-term asset, such as equipment, is transferred to expense as it is used during its useful

A) True

False

Answer: A Explanation:

Diff: 1

Topic: The Worksheet

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

3) If the adjustment for supplies used is not recorded, the firm’s assets will be overstated.

True
False

Answer: A Explanation:

Diff: 2

Topic: The Worksheet

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

4) If the adjustment for expired rent is not recorded, the firm’s expenses will be overstated.

True
False

Answer: B Explanation:

Diff: 2

Topic: The Worksheet

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

5) The normal balance of a contra asset account is a debit.

True
False

Answer: B Explanation:

Diff: 2

Topic: The Worksheet

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

Letters are used to label the corresponding debit and credit transactions of an adjustment on the

A) True

False

Answer: A Explanation:

Diff: 1

Topic: The Worksheet

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

7) Land is a long-term asset that is not subject to depreciation.

True
False

Answer: A Explanation:

Diff: 1

Topic: The Worksheet

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

The balances of the revenue accounts are recorded in the Trial Balance Credit column, the Adjusted Trial Balance Credit column, and the Balance Sheet Credit column of the

A) True

False

Answer: B Explanation:

Diff: 1

Topic: Financial Statements

Learning Objective: 05-03 Complete the worksheet. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

Preparation of a worksheet eliminates the necessity of preparing an income statement and a balance

A) True

False

Answer: B Explanation:

Diff: 1

Topic: Financial Statements

Learning Objective: 05-03 Complete the worksheet. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

In the Adjusted Trial Balance section of the worksheet the total debits should equal the total

A) True

False

Answer: A Explanation:

Diff: 1

Topic: Financial Statements

Learning Objective: 05-03 Complete the worksheet. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

The balance of the owner’s drawing account is extended to the Income Statement Debit column of the

A) True

False

Answer: B Explanation:

Diff: 2

Topic: Financial Statements

Learning Objective: 05-03 Complete the worksheet. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

12) The balance of a liability account is extended to the Balance Sheet Credit column of the worksheet.

True
False

Answer: A Explanation:

Diff: 1

Topic: Financial Statements

Learning Objective: 05-03 Complete the worksheet. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

The statement of owner’s equity is prepared from the data in the Balance Sheet section of the

A) True

False

Answer: A Explanation:

Diff: 2

Topic: Financial Statements

Learning Objective: 05-04 Prepare an income statement, statement of owner’s equity, and balance sheet from the completed worksheet. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

If adjustments are entered on a worksheet, it is not necessary to record them in the journal or the

A) True

False

Answer: B Explanation:

Diff: 1

Topic: Financial Statements

Learning Objective: 05-05 Journalize and post the adjusting entries. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

15) Which of the following need not be completed separately if a worksheet is prepared?

a trial balance B) a balance sheet
C) an income statement D) a statement of owner’s equity Answer: A

Explanation: A)

Diff: 1

Topic: The Worksheet

Learning Objective: 05-01 Complete a trial balance on a worksheet. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

16) When a trial balance is in balance,

adjusting entries are not
the company has earned a net
the general ledger is free of
the debit account balances equal the credit account Answer: D

Explanation: A)

Diff: 2

Topic: The Worksheet

Learning Objective: 05-01 Complete a trial balance on a worksheet. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

A total of $2,800 in supplies was purchased during the At the end of the year $700 of the supplies were left. The adjusting entry needed at the end of the year is:

A) debit Supplies Expense $700; credit Supplies $700

debit Supplies Expense $2,800; credit Supplies $2,800
debit Supplies Expense $2,100; credit Supplies $2,100
debit Supplies $2,100; credit Supplies Expense $2,100 Answer: C

Explanation: A) $2,800 – $700 = $2,100

B) $2,800 – $700 = $2,100 C) $2,800 – $700 = $2,100 D) $2,800 – $700 = $2,100

Diff: 1

Topic: The Worksheet

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Apply

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

A total of $3,700 in supplies was purchased during the By the end of the year, the company had used $2,200 of the supplies. The adjusting entry needed at the end of the year is:

A) debit Supplies $2,200; credit Supplies Expense $2,200

debit Supplies Expense $3,700; credit Supplies $3,700
debit Supplies Expense $1,500; credit Supplies $1,500
debit Supplies Expense $2,200; credit Supplies $2,200 Answer: D

Explanation: A) Since the problem stated that $2,200 had been used, that is the amount that needs

to be credited from the supplies account and recognized as an expense.

Since the problem stated that $2,200 had been used, that is the amount that needs to be credited from the supplies account and recognized as an
Since the problem stated that $2,200 had been used, that is the amount that needs to be credited from the supplies account and recognized as an
Since the problem stated that $2,200 had been used, that is the amount that needs to be credited from the supplies account and recognized as an

Diff: 1

Topic: The Worksheet

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Apply

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

MacGyver Company bought equipment on January 3, 2019, for $52,000. At the time of purchase, the equipment was estimated to have a useful life of five years and a salvage value of $4,000. Using the straight-line method, the amount of one year’s depreciation is:

A) $1,200. B) $4,000. C) $9,600. D) $10,400.

Answer: C

Explanation: A) ($52,000 – $4,000)/5 years = $9,600 per year B) ($52,000 – $4,000)/5 years = $9,600 per year C) ($52,000 – $4,000)/5 years = $9,600 per year D) ($52,000 – $4,000)/5 years = $9,600 per year

Diff: 1

Topic: The Worksheet

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Apply

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

20) Adjusting Entries are:

updating entries for previously unrecorded expenses or
corrections of
not
will always affect Answer: A

Explanation: A)

Diff: 1

Topic: The Worksheet

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

Equipment costing $27,000 with an estimated salvage value of $2,040 and an estimated life of 4 years was purchased on October 31, Using the straight-line depreciation method, what is the amount of depreciation expense to be recorded at December 31, 2019?

A) $520 B) $1,560 C) $1,125 D) $1,040

Answer: D

Explanation: A) ($27,000 – $2,040)/48 months = $520 per month * 2 months = $1,040 B) ($27,000 – $2,040)/48 months = $520 per month * 2 months = $1,040 C) ($27,000 – $2,040)/48 months = $520 per month * 2 months = $1,040 D) ($27,000 – $2,040)/48 months = $520 per month * 2 months = $1,040

Diff: 1

Topic: The Worksheet

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Apply

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

Which of the following entries records the depreciation on equipment for the fiscal year-end adjustment?

A) Debit Depreciation; credit Depreciation Expense

Debit Depreciation Expense; credit Equipment
Debit Depreciation Expense; credit Accumulated Depreciation
Debit Accumulated Depreciation; credit Depreciation Expense Answer: C

Explanation: A)

Diff: 1

Topic: The Worksheet

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

On January 1, ABC Catering purchased an oven for $5,000. The oven is expected to last five years and have no salvage Select the adjusting entry made on December 31, to record the depreciation of the oven for one year.

A)

Depreciation Expense $ 500

Accumulated Depreciation–Equipment $ 500

B)

Accumulated Depreciation-Equipment $ 500 Equipment $ 500

C)

Depreciation Expense $ 1,000

Equipment $ 1,000

D)

Depreciation Expense $ 1,000

Accumulated Depreciation-Equipment $ 1,000

Answer: D

Explanation: A) ($5,000-0)/5 years = $1,000

B) ($5,000-0)/5 years = $1,000

Diff: 2

C) ($5,000-0)/5 years = $1,000 D) ($5,000-0)/5 years = $1,000

Topic: The Worksheet; Financial Statements

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions.; 05-05 Journalize and post the adjusting entries. Bloom’s: Apply

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

On January 1, 2019, Johnson Consulting purchased a truck for $18,000. The truck is expected to last 60 months and have no salvage Calculate the book value of the truck on December 31, 2020.

A) $3,600 B) $14,400 C) $7,200 D) $10,800

Answer: D

Explanation: A) ($18,000-0)/5 years = $3,600; (2 years * $3,600 = $7,200); $18,000 – $7,200 =

$10,800

B) ($18,000-0)/5 years = $3,600; (2 years * $3,600 = $7,200); $18,000 – $7,200 =

$10,800

C) ($18,000-0)/5 years = $3,600; (2 years * $3,600 = $7,200); $18,000 – $7,200 =

$10,800

D) ($18,000-0)/5 years = $3,600; (2 years * $3,600 = $7,200); $18,000 – $7,200 =

$10,800

Diff: 2

Topic: The Worksheet

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Apply

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

On September 1, 2019, Jay Walker Company purchased a one-year insurance policy for $1,320. The correct adjusting entry on December 31, 2019, is:

A) debit Prepaid Insurance $110; credit Insurance Expense $110

debit Insurance Expense $330; credit Prepaid Insurance $330
debit Prepaid Insurance $1,320; credit Insurance Expense $1,320
debit Insurance Expense $440; credit Prepaid Insurance $440 Answer: D

Explanation: A) $1,320/12 months = $110 per month * 4 months = $440

$1,320/12 months = $110 per month * 4 months = $440
$1,320/12 months = $110 per month * 4 months = $440
$1,320/12 months = $110 per month * 4 months = $440

Diff: 2

Topic: The Worksheet

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Apply

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

On November 1, 2019, Peaches Consulting Service paid $4,800 for 12 months of advance rent on its office The correct adjusting entry on December 31, 2019, to show the amount of rent that had expired would include:

A) debit Rent Expense $4,800; credit Prepaid Rent $4,800

debit Rent Expense $800; credit Prepaid Rent $800
debit Rent Expense $400; credit Prepaid Rent $400
debit Prepaid Rent $4,000; credit Rent Expense $4,000 Answer: B

Explanation: A) $4,800/12 months = $400 per month * 2 months = $800

$4,800/12 months = $400 per month * 2 months = $800
$4,800/12 months = $400 per month * 2 months = $800
$4,800/12 months = $400 per month * 2 months = $800

Diff: 2

Topic: The Worksheet

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Apply

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

Equipment cost $36,000 and is expected to be useful for 5 years and have no salvage Under the straight-line method, monthly depreciation will be:

A) $12. B) $600. C) $60. D) $720.

Answer: B

Explanation: A) ($36,000 – $0)/60 months = $600 per month B) ($36,000 – $0)/60 months = $600 per month C) ($36,000 – $0)/60 months = $600 per month D) ($36,000 – $0)/60 months = $600 per month

Diff: 2

Topic: The Worksheet

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Apply

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

B. Consulting purchased a machine for $6,000 on August 1, 2019. The company expects the useful life of the machine to be 5 years and no salvage value is expected. If the company uses the straight-line method to depreciate the machine, what will be the depreciation adjustment for the year ending December 31, 2019?
1. Debit Depreciation Expense $500 and Credit Equipment $500.
2. Debit Depreciation Expense $400 and Credit Accumulated Depreciation $400.
3. Debit Depreciation Expense $500 and Credit Accumulated Depreciation $500.
4. Debit Accumulated Depreciation $100 and Credit Depreciation Expense $100. Answer: C

Explanation: A) ($6,000 – $0)/60 months = $100 per month; 5 months * $100 = $500

B) ($6,000 – $0)/60 months = $100 per month; 5 months * $100 = $500 C) ($6,000 – $0)/60 months = $100 per month; 5 months * $100 = $500 D) ($6,000 – $0)/60 months = $100 per month; 5 months * $100 = $500

Diff: 2

Topic: The Worksheet

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Apply

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

29) On a worksheet, the adjusting entry to account for depreciation of equipment consists of:

a debit to Accumulated Depreciation and a credit to
a debit to Depreciation Expense and a credit to Accumulated
a debit to Depreciation Expense and a credit to
a debit to Accumulated Depreciation and a credit to Depreciation Answer: B

Explanation: A)

Diff: 2

Topic: The Worksheet

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

30) If the prepaid expenses are not adjusted, assets on the balance sheet:

will be B) will be overstated.
C) may be either overstated or D) will not be affected. Answer: B

Explanation: A)

Diff: 3

Topic: The Worksheet

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Analyze

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

31) If long-term assets are not adjusted, expenses on the income statement:

will be B) will be understated.
C) will not be D) may be either overstated or understated. Answer: B

Explanation: A)

Diff: 3

Topic: The Worksheet

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Analyze

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

On October 25, 2019, the company paid $24,000 rent in advance for the six-month period (November 2019 through April 2020). On December 31, 2019, the adjustment for expired rent would include:

A) a $4,000 credit to Prepaid Rent. B) a $8,000 credit to Rent Expense.

a $8,000 debit to Rent Expense. D) a $24,000 credit to Answer: C

Explanation: A) $24,000/6 months = $4,000 per month; 4,000/mo. * 2 months = $8,000

B) $24,000/6 months = $4,000 per month; 4,000/mo. * 2 months = $8,000 C) $24,000/6 months = $4,000 per month; 4,000/mo. * 2 months = $8,000 D) $24,000/6 months = $4,000 per month; 4,000/mo. * 2 months = $8,000

Diff: 2

Topic: The Worksheet

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Apply

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

On March 1, 2019, the company paid $6,000 rent in advance for a 12-month On December 31, 2019, the company’s adjustment for expired rent would include:

A) a $6,000 debit to Prepaid Rent; a $6,000 credit to Rent Expense.

a $1,000 debit to Rent Expense; a $1,000 credit to Prepaid
a $5,000 debit to Rent Expense; a $5,000 credit to Prepaid
a $5,000 debit to Prepaid Rent; a $5,000 credit to Rent Answer: C

Explanation: A) $6,000/12 months = $500 per month; ($500 * 10 months = $5,000)

B) $6,000/12 months = $500 per month; ($500 * 10 months = $5,000) C) $6,000/12 months = $500 per month; ($500 * 10 months = $5,000) D) $6,000/12 months = $500 per month; ($500 * 10 months = $5,000)

Diff: 2

Topic: The Worksheet

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Apply

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

On July 1, Sidney Consulting Services paid $18,000 for 12 months of advance rent on its office Select the adjusting entry made on December 31, to record the amount of rent that had expired during the year.

A)

Rent Expense $ 10,500

Prepaid Rent $ 10,500

B)

Prepaid Rent $ 18,000

Rent Expense $ 18,000

C)

Prepaid Rent $ 10,500

Rent Expense $ 10,500

D)

Rent Expense $ 9,000

Prepaid Rent $ 9,000

Answer: D

Explanation: A) $18,000/12 months = $1,500 per month; ($1,500 * 6 months = $9,000) B) $18,000/12 months = $1,500 per month; ($1,500 * 6 months = $9,000)

Diff: 2

C) $18,000/12 months = $1,500 per month; ($1,500 * 6 months = $9,000) D) $18,000/12 months = $1,500 per month; ($1,500 * 6 months = $9,000)

Topic: The Worksheet; Financial Statements

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions.; 05-05 Journalize and post the adjusting entries. Bloom’s: Apply

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

The balance in the Prepaid Rent account before adjustment at the end of the year is $12,000, which represents 12 months rent paid on November 1. The adjusting entry required on December 31 to show the amount of rent that had expired is:

A)

Rent Expense $ 1,000

Prepaid Rent $ 1,000

B)

Rent Expense $ 2,000

Prepaid Rent $ 2,000

C)

Rent Expense $ 12,000

Cash $ 12,000

D)

Prepaid Rent $ 12,000

Rent Expense $ 12,000

Answer: B

Explanation: A) $12,000/12 months = $1,000 per month; ($1,000 * 2 months = $2,000) B) $12,000/12 months = $1,000 per month; ($1,000 * 2 months = $2,000) C) $12,000/12 months = $1,000 per month; ($1,000 * 2 months = $2,000) D) $12,000/12 months = $1,000 per month; ($1,000 * 2 months = $2,000)

Diff: 2

Topic: The Worksheet; Financial Statements

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions.; 05-05 Journalize and post the adjusting entries. Bloom’s: Apply

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

36) The adjusting entry to account for the use of supplies consists of:

a debit to Supplies and a credit to Accumulated
a debit to Accumulated Depreciation and a credit to
a debit to Supplies and a credit to Supplies
a debit to Supplies Expense and a credit to Answer: D

Explanation: A)

Diff: 1

Topic: The Worksheet

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

On December 31, Treats Catering ‘s trial balance shows a $1,000 balance in the Supplies account. However, a physical count of the supplies determined that only $350 of supplies actually remain in the supply cabinet. Select the adjusting entry made on December 31, to record the amount of supplies that had been used during the year.

A)

Supplies Expense. $ 350

Supplies $ 350

B)

Supplies $ 350

Supplies Expense $ 350

C)

Supplies Expense $ 650

Supplies $ 650

D)

Supplies $ 650

Supplies Expense $ 650

Answer: C

Explanation: A) $1,000 – $350 = $650 of supplies had been used.

$1,000 – $350 = $650 of supplies had been

Diff: 2

C) $1,000 – $350 = $650 of supplies had been used.

$1,000 – $350 = $650 of supplies had been

Topic: The Worksheet; Financial Statements

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions.; 05-05 Journalize and post the adjusting entries. Bloom’s: Apply

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

During its first year of business, XYZ purchased $1,600 of supplies. By the end of the year, only $500 of supplies remain in the supply cabinet. Determine the amount to be reported in the Supplies account in the Adjusted Trial Balance section of the worksheet prepared on December 31.

A) $500 B) $1,600 C) $1,100 D) $2,100

Answer: A

Explanation: A) It is stated that $500 in supplies remain, therefore that is the adjusted supplies balance.

It is stated that $500 in supplies remain, therefore that is the adjusted supplies
It is stated that $500 in supplies remain, therefore that is the adjusted supplies
It is stated that $500 in supplies remain, therefore that is the adjusted supplies

Diff: 1

Topic: Financial Statements

Learning Objective: 05-03 Complete the worksheet. Bloom’s: Apply

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

39) Adjusting entries can be journalized:

only once per accounting
only once a
as often as
only once a year at the end of the accounting Answer: C

Explanation: A)

Diff: 2

Topic: The Worksheet

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

40) The adjusting entry to account for the expiration of prepaid insurance consists of:

a debit to Accumulated Depreciation and a credit to Prepaid
a debit to Insurance Expense and a credit to Prepaid
a debit to Insurance Expense and a credit to Accumulated
a debit to Prepaid Insurance and a credit to Accumulated Answer: B

Explanation: A)

Diff: 2

Topic: The Worksheet

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

41) The adjusting entry to account for the expiration of prepaid advertising consists of:

a debit to Prepaid Advertising and a credit to Accumulated
a debit to Prepaid Advertising and a credit to Advertising
a debit to Advertising Expense and a credit to Accumulated
a debit to Advertising Expense and a credit to Prepaid Answer: D

Explanation: A)

Diff: 1

Topic: The Worksheet

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

42) Which of the following statements is not correct?

The book value of a long-term asset is reduced each year as depreciation is
Buildings and trucks are examples of long-term
Salvage value is computed by subtracting the accumulated depreciation from the cost of a long-term
Generally accepted accounting principles require that the original cost of a long-term asset continue to appear in the asset account until the disposition of the

Answer: C Explanation: A)

Diff: 2

Topic: The Worksheet

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Understand

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

43) On a worksheet, the adjusted balance of the Accumulated Depreciation account is extended to:

the Balance Sheet Credit B) the Income Statement Debit column.
C) the Income Statement Credit D) the Balance Sheet Debit column. Answer: A

Explanation: A)

Diff: 2

Topic: Financial Statements

Learning Objective: 05-03 Complete the worksheet. Bloom’s: Understand

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

44) On a worksheet, the adjusted balance of the Depreciation Expense account is extended to:

the Income Statement Debit B) the Balance Sheet Debit column.
C) the Income Statement Credit D) the Balance Sheet Credit column. Answer: A

Explanation: A)

Diff: 1

Topic: Financial Statements

Learning Objective: 05-03 Complete the worksheet. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

45) On a worksheet, the adjusted balance of the Supplies account is extended to:

the Income Statement Debit B) the Balance Sheet Credit column.
C) the Income Statement Credit D) the Balance Sheet Debit column. Answer: D

Explanation: A)

Diff: 1

Topic: Financial Statements

Learning Objective: 05-03 Complete the worksheet. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

46) On a worksheet, the adjusted balance of the Supplies Expense account is extended to:

the Balance Sheet Debit B) the Income Statement Debit column.
C) the Balance Sheet Credit D) the Income Statement Credit column. Answer: B

Explanation: A)

Diff: 1

Topic: Financial Statements

Learning Objective: 05-03 Complete the worksheet. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

47) Which of the following statements is correct?

Accumulated Depreciation–Equipment is presented in the Liabilities section of a balance

B) The cost of supplies used is reported on the statement of owner’s equity.

The cost of supplies used represents an operating expense of the
At the time of their acquisition, prepaid expenses are recorded in expense Answer: C

Explanation: A)

Diff: 2

Topic: The Worksheet; Financial Statements

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions.; 05-04 Prepare an income statement, statement of owner’s equity, and balance sheet from the completed worksheet.

Bloom’s: Understand AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

48) On a worksheet, the adjusted balance of the Prepaid Rent account is extended to the:

Income Statement Debit B) Balance Sheet Credit column.
C) Balance Sheet Debit D) Income Statement Credit column. Answer: C

Explanation: A)

Diff: 1

Topic: Financial Statements

Learning Objective: 05-03 Complete the worksheet. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

49) On a worksheet, the adjusted balance of the revenue account Fees Income would be extended to:

the Balance Sheet Credit B) the Income Statement Debit column.
C) the Income Statement Credit D) the Balance Sheet Debit column. Answer: C

Explanation: A)

Diff: 1

Topic: Financial Statements

Learning Objective: 05-03 Complete the worksheet. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

50) On the worksheet, the Balance Sheet columns should balance:

after the net income amount is added to the Balance Sheet Credit
before the net income amount is added to the Balance Sheet Credit
before the net income amount is added to the Balance Sheet Debit
after the net income amount is added to the Balance Sheet Debit Answer: A

Explanation: A)

Diff: 2

Topic: Financial Statements

Learning Objective: 05-03 Complete the worksheet. Bloom’s: Understand

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

51) On a worksheet, the adjusted balance of a contra asset account would be extended to:

the Income Statement Debit B) the Balance Sheet Debit column.
C) the Income Statement Credit D) the Balance Sheet Credit column. Answer: D

Explanation: A)

Diff: 2

Topic: Financial Statements

Learning Objective: 05-03 Complete the worksheet. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

52) On a worksheet, a net loss is:

recorded in the Income Statement Debit
not
recorded in the Balance Sheet Credit
recorded in the Balance Sheet Debit Answer: D

Explanation: A)

Diff: 2

Topic: Financial Statements

Learning Objective: 05-03 Complete the worksheet. Bloom’s: Understand

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

53) If a worksheet is prepared at the end of the accounting year,

the financial statements are prepared using the worksheet
preparation of the financial statements is not
the adjusting entries do not need to be
only a balance sheet is Answer: A

Explanation: A)

Diff: 1

Topic: Financial Statements

Learning Objective: 05-03 Complete the worksheet. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

54) Which of the following statements is not correct?

If an account has a debit balance in the Trial Balance section of the worksheet and there is a credit entry in the Adjustments section, the credit amount is added when computing the balance to be shown in the Adjusted Trial Balance section of the
Net loss is recorded on the worksheet in the Income Statement Credit column and the Balance Sheet Debit
Net income is recorded on the worksheet in the Income Statement Debit column and the Balance Sheet Credit
The difference between the total of the Income Statement Debit column and the total of the Income Statement Credit column of the worksheet represents either net income or net

Answer: A Explanation: A)

Diff: 2

Topic: Financial Statements

Learning Objective: 05-03 Complete the worksheet. Bloom’s: Understand

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

55) On a balance sheet, Accumulated Depreciation—Equipment is reported:

as a contra-asset on the Balance B) as a liability on the Income Statement.
C) as an expense on the Income D) as owner’s equity on the Balance Sheet. Answer: A

Explanation: A)

Diff: 2

Topic: Financial Statements

Learning Objective: 05-04 Prepare an income statement, statement of owner’s equity, and balance sheet from the completed worksheet. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

56) The book value of long-term assets is reported on:

the B) the statement of owner’s equity.
C) the income statement. D) the balance Answer: D

Explanation: A)

Diff: 2

Topic: Financial Statements

Learning Objective: 05-04 Prepare an income statement, statement of owner’s equity, and balance sheet from the completed worksheet. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

The balance in the account Accumulated Depreciation, Equipment will:

A) be reported on the Statement of Owner’s Equity.

will be reported on the Balance
not appear on any financial
be reported on the Income Answer: B

Explanation: A)

Diff: 1

Topic: Financial Statements

Learning Objective: 05-04 Prepare an income statement, statement of owner’s equity, and balance sheet from the completed worksheet. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

58) A consecutive, twelve-month accounting period is called a(n):

adjusted B) fiscal year.
C) accounting D) accrual year. Answer: B

Explanation: A)

Diff: 1

Topic: Financial Statements

Learning Objective: 05-04 Prepare an income statement, statement of owner’s equity, and balance sheet from the completed worksheet. Bloom’s: Remember

AACSB: Analytical Thinking AICPA: BB Industry; FN Reporting

59) Accumulated Depreciation, Equipment, is shown as:

an addition to expenses on the Income
a deduction of Capital on the Statement of Owner’s
an addition to assets on the Balance
a deduction from assets on the Balance Answer: D

Explanation: A)

Diff: 1

Topic: Financial Statements

Learning Objective: 05-04 Prepare an income statement, statement of owner’s equity, and balance sheet from the completed worksheet. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

60) The adjustments made on the worksheet:

need not be entered in the journal or the
are posted to the ledger but are not recorded in the
are recorded in the journal but are not posted to the
are recorded in the journal and then posted to the general ledger Answer: D

Explanation: A)

Diff: 2

Topic: Financial Statements

Learning Objective: 05-05 Journalize and post the adjusting entries. Bloom’s: Remember

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

The unadjusted net income on the income statement was $46,850. After journalizing and posting the adjusting entry for the $2,300 of supplies used during the year, the adjusted net income is:

A) $46,850. B) $44,550. C) $49,150. D) $45,700.

Answer: B

Explanation: A) $46,850 – $2,300 = $44,550

B) $46,850 – $2,300 = $44,550 C) $46,850 – $2,300 = $44,550 D) $46,850 – $2,300 = $44,550

Diff: 3

Topic: Financial Statements

Learning Objective: 05-03 Complete the worksheet. Bloom’s: Understand

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

The unadjusted net income on the income statement was $23,760. After journalizing and posting the adjusting entries for the $1,620 of supplies used and $3,700 of depreciation on the company’s equipment for the year, the adjusted net income is:

A) $25,840. B) $18,440. C) $21,680. D) $29,080.

Answer: B

Explanation: A) $23,760 – $1,620 – $3,700 = $18,440 B) $23,760 – $1,620 – $3,700 = $18,440 C) $23,760 – $1,620 – $3,700 = $18,440 D) $23,760 – $1,620 – $3,700 = $18,440

Diff: 3

Topic: Financial Statements

Learning Objective: 05-03 Complete the worksheet. Bloom’s: Understand

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

The unadjusted net income on the income statement was $41,800. After journalizing and posting the adjusting entry for the $600 of prepaid advertising that expired and $1,600 in supplies used during the year, the adjusted net income is:

A) $41,800. B) $39,600. C) $40,200. D) $41,200.

Answer: B

Explanation: A) $41,800 – $600 – $1,600 = $39,600 B) $41,800 – $600 – $1,600 = $39,600 C) $41,800 – $600 – $1,600 = $39,600 D) $41,800 – $600 – $1,600 = $39,600

Diff: 3

Topic: Financial Statements

Learning Objective: 05-03 Complete the worksheet. Bloom’s: Understand

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

The unadjusted net income on the income statement was $64,916. After journalizing and posting the adjusting entries for expired insurance during the year of $3,400 and for supplies used during the year of $1,480, the adjusted net income is:

A) $69,796. B) $61,516. C) $64,916. D) $60,036.

Answer: D

Explanation: A) $64,916 – $3,400 – $1,480 = $60,036 B) $64,916 – $3,400 – $1,480 = $60,036 C) $64,916 – $3,400 – $1,480 = $60,036 D) $64,916 – $3,400 – $1,480 = $60,036

Diff: 3

Topic: Financial Statements

Learning Objective: 05-03 Complete the worksheet. Bloom’s: Understand

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

The total assets on the balance sheet was $128,800 before journalizing and posting the adjusting entries for $800 of expired insurance, $2,400 of expired rent and $900 of What are the total assets after journalizing and posting the adjusting?

A) $128,800. B) $124,700. C) $126,500. D) $132,900.

Answer: B

Explanation: A) $128,800 – $800 – $2,400 – $900 = $124,700 B) $128,800 – $800 – $2,400 – $900 = $124,700 C) $128,800 – $800 – $2,400 – $900 = $124,700 D) $128,800 – $800 – $2,400 – $900 = $124,700

Diff: 3

Topic: Financial Statements

Learning Objective: 05-03 Complete the worksheet. Bloom’s: Understand

AACSB: Analytical Thinking

AICPA: BB Industry; FN Measurement; FN Reporting

SHORT ANSWER QUESTIONS

The process of allocating the cost of a long-term asset as an expense of operations during the asset’s expected useful life is known as

Answer: depreciation Explanation:

Diff: 1

Topic: Adjustments

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions.; 05-06 Bloom’s: Remember

AACSB: Analytic

AICPA: BB Industry; FN Reporting; FN Measurement

The difference between the debit balance of the Equipment account and the credit balance of the Accumulated Depreciation–Equipment account is called the ________ of an

Answer: book value Explanation:

Diff: 2

Topic: Adjustments

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Remember

AACSB: Analytic

AICPA: BB Industry; FN Reporting; FN Measurement

The Supplies account had a balance of $1,200 when a physical count indicated that supplies on hand totaled $250. This means that supplies in the amount of ________ were used during the accounting

Answer: $950

Explanation: $1,200 – $250 = $950

Diff: 1

Topic: Adjustments

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Remember

AACSB: Analytic

AICPA: BB Industry; FN Reporting; FN Measurement

The process of updating accounts at the end of an accounting period for previously unrecorded items that belong to the period is referred to as making

Answer: adjustments or adjusting entries Explanation:

Diff: 1

Topic: Adjustments

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions.; 05-06 Bloom’s: Remember

AACSB: Analytic

AICPA: BB Industry; FN Reporting; FN Measurement

The account credited in the adjusting entry made to record the expiration of a portion of prepaid rent is the ________

Answer: Prepaid Rent Explanation:

Diff: 2

Topic: Adjustments

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Remember

AACSB: Analytic

AICPA: BB Industry; FN Reporting; FN Measurement

71) Accumulated depreciation is classified as a(n) ________ account. Answer: contra-asset

Explanation:

Diff: 1

Topic: Adjustments

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Remember

AACSB: Analytic

AICPA: BB Industry; FN Reporting; FN Measurement

When the ________ method of depreciation is used, an equal amount of depreciation is charged to each accounting period during the asset’s useful

Answer: straight-line Explanation:

Diff: 1

Topic: Adjustments

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Remember

AACSB: Analytic

AICPA: BB Industry; FN Reporting; FN Measurement

73) The account accumulated depreciation has a normal balance. Answer: credit

Explanation:

Diff: 1

Topic: Adjustments

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Remember

AACSB: Analytic

AICPA: BB Industry; FN Reporting; FN Measurement

A(n) ________ is prepared at the end of each accounting period to organize and summarize the data needed for the preparation of the financial

Answer: worksheet Explanation:

Diff: 1

Topic: The Worksheet

Learning Objective: 05-03 Complete the worksheet. Bloom’s: Remember

AACSB: Analytic

AICPA: BB Industry; FN Reporting; FN Measurement

On a worksheet, the adjusted balance of Supplies is extended from the Adjusted Trial Balance Debit column to the ________ Debit

Answer: Balance Sheet Explanation:

Diff: 1

Topic: The Worksheet

Learning Objective: 05-03 Complete the worksheet. Bloom’s: Remember

AACSB: Analytic

AICPA: BB Industry; FN Reporting; FN Measurement

On a worksheet, the adjusted balance of Depreciation Expense is extended from the Adjusted Trial Balance Debit column to the ________ Debit

Answer: Income Statement Explanation:

Diff: 1

Topic: The Worksheet

Learning Objective: 05-03 Complete the worksheet. Bloom’s: Remember

AACSB: Analytic

AICPA: BB Industry; FN Reporting; FN Measurement

For each of the accounts listed below, enter the words, Increase or Decrease, in the Debit and Credit columns to indicate the effects of each on the account

Account		Debit	Credit
A.	Accumulated Deprecation
B.	Depreciation Expense
C.	Equipment
D.	Prepaid Rent
E.	Rent Expense
F.	Supplies
G.	Supplies Expense

Account		Debit	Credit
A.	Accumulated Deprecation	Decrease	Increase
B.	Depreciation Expense	Increase	Decrease
C.	Equipment	Increase	Decrease
D.	Prepaid Rent	Increase	Decrease
E.	Rent Expense	Increase	Decrease
F.	Supplies	Increase	Decrease
G.	Supplies Expense	Increase	Decrease

Answer:

Explanation:

Diff: 1

Topic: The Worksheet; Adjustments

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Remember

AACSB: Analytic

AICPA: BB Industry; FN Reporting; FN Measurement

For each of the accounts listed below, enter the words, Increase or Decrease, in the Debit and Credit columns to indicate the effects of each on the account

Account		Debit	Credit
A.	Accumulated Deprecation
B.	Advertising Expense
C.	Depreciation Expense
D.	Insurance Expense
E.	Land
F.	Prepaid Advertising
G.	Prepaid Insurance

Account		Debit	Credit
A.	Accumulated Deprecation	Decrease	Increase
B.	Advertising Expense	Increase	Decrease
C.	Depreciation Expense	Increase	Decrease
D.	Insurance Expense	Increase	Decrease
E.	Land	Increase	Decrease
F.	Prepaid Advertising	Increase	Decrease
G.	Prepaid Insurance	Increase	Decrease

Answer:

Explanation:

Diff: 1

Topic: The Worksheet; Adjustments

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Remember

AACSB: Analytic

AICPA: BB Industry; FN Reporting; FN Measurement

Read each of the following transactions for Patel’s Repair Determine the accounts and amounts to be debited and credited in the necessary end-of-May adjustments.

On May 1, 2019, Patel’s Repair Services, a new firm, paid $6,600 rent in advance for a six-month The $6,600 was debited to the Prepaid Rent account.
On May 1, 2019, the firm bought supplies for $2,000. The $2,000 was debited to the Supplies An inventory of supplies at the end of May showed that supplies costing $800 were on hand.
On May 1, 2019, the firm bought equipment costing $12,000. The equipment has an expected useful life of 10 years and no salvage The firm will use the straight-line method of depreciation.

Answer: A. Rent Expense (dr.) $1,100; Prepaid Rent (cr.) $1,100

Supplies Expense (dr.) $1,200; Supplies (cr.) $1,200
Depreciation Expense (dr.) $100; Accumulated Depreciation (cr.) $100

Explanation: A. $6,600/6 months = $1,100 per month B. $2,000 – $800 = $1,200 used

($12,000 – $0)/120 months = $100 per month

Diff: 2

Topic: The Worksheet; Adjustments

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Apply

AACSB: Analytic

AICPA: BB Industry; FN Measurement; FN Reporting

Read each of the following transactions for Pickerton Printer Repair Determine the accounts and amounts to be debited and credited in the necessary end-of-April adjustments.

On April 1, 2019, Pickerton Printer Repair Services, a new firm, bought supplies for $2,500. The

$2,500 was debited to the Supplies account. An inventory of supplies at the end of April showed that supplies costing $1,500 were on hand.

On April 1, 2019, the firm bought equipment costing $25,000. The equipment has an expected useful life of 10 years and a salvage value of $1,000. The firm will use the straight-line method of
On April 1, 2019, the firm paid $7,200 rent in advance for a six-month The $7,200 was debited to the Prepaid Rent account.

Answer: A. Supplies Expense (dr.) $1,000; Supplies (cr.) $1,000

Depreciation Expense (dr.) $200; Accumulated Depreciation (cr.) $200
Rent Expense (dr.) $1,200; Prepaid Rent (cr.) $1,200

Explanation: A. $2,500-$1,500 = $1,000 used

($25,000 – $1,000)/120 months = $200 per month
$7,200/6 months = $1,200 per month

Diff: 2

Topic: The Worksheet; Adjustments

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Apply

AACSB: Analytic

AICPA: BB Industry; FN Reporting; FN Measurement

Read each of the following transactions for Gallagher Determine the accounts and amounts to be debited and credited in the necessary end-of-January adjustments.

On January 1, 2019, Gallagher Enterprises, a new firm, paid $4,800 rent in advance for a three-month The $4,800 was debited to the Prepaid Rent account.
On January 1, 2019, the firm bought supplies for $3,000. The $3,000 was debited to the Supplies An inventory of supplies at the end of January showed that supplies costing $1,300 were on hand.
On January 1, 2019, the firm bought equipment costing $15,000. The equipment has an expected useful life of 8 years and a salvage value of $1,560. The firm will use the straight-line method of

Answer: A. Rent Expense (dr.) $1,600; Prepaid Rent (cr.) $1,600

Supplies Expense (dr.) $1,700; Supplies (cr.) $1,700
Depreciation Expense (dr.) $140; Accumulated Depreciation (cr.) $140

Explanation: A. $4,800/3 months = $1,600 per month B. $3,000 – $1,300 = $1,700 used

($15,000 – $1,560)/96 months = $140 per month

Diff: 2

Topic: The Worksheet; Adjustments

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Apply

AACSB: Analytic

AICPA: BB Industry; FN Reporting; FN Measurement

Read each of the following transactions for Enterprises Security Determine the accounts and amounts to be debited and credited in the necessary end-of-July adjustments.

On July 1, 2019, Enterprises Security Systems, a new firm, bought supplies for $2,300. The

$2,300 was debited to the Supplies account. An inventory of supplies at the end of July showed that supplies costing $900 were on hand.

On July 1, 2019, the firm bought equipment costing $24,000. The equipment has an expected useful life of 10 years and no salvage The firm will use the straight-line method of depreciation.
On July 1, 2019, the firm paid $4,500 rent in advance for a nine-month The $4,500 was debited to the Prepaid Rent account.

Answer: A. Supplies Expense (dr.) $1,400; Supplies (cr.) $1,400

Depreciation Expense (dr.) $200; Accumulated Depreciation (cr.) $200
Rent Expense (dr.) $500; Prepaid Rent (cr.) $500

Explanation: A. $2,300 – $900 = $1,400

($24,000 – $0)/120 months = $200 per month C. $4,500/9 = $500 per month

Diff: 2

Topic: The Worksheet; Adjustments

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Apply

AACSB: Analytic

AICPA: BB Industry; FN Reporting; FN Measurement

Read the description of the following adjustments that are required at the end of the accounting period for Riley Furniture Determine the account and amount to be debited and the account and amount to be credited.

Purchased supplies for $1,000 on June 1, Inventory of supplies was $300 on June 30, 2019. Record the adjustment for the amount of the supplies used during the month of June 2019.
Signed a 4-month contract for $1,200 of prepaid advertising on June 1, Record the adjustment for the amount of the advertising contract that expired during the month of June 2019.
Prepaid rent for one year on June 1, 2019, in the amount of $12,600.
Depreciation is computed using the straight-line Equipment purchased on June 1, 2019, for $16,800 has an estimated useful life of 5 years with no salvage value. Record the adjustment on June 30, 2019.

Answer: A. Debit Supplies Expense, $700; credit Supplies, $700

Debit Advertising Expense, $300; credit Prepaid Advertising, $300
Debit Rent Expense, $1,050; credit Prepaid Rent, $1,050
Debit Depreciation Expense–Equipment, $280; credit Accumulated Depreciation–Equipment, $280

Explanation: A. $1,000 – $300 = $700 used

$1,200/4 = $300 per month C. $12,600/12 = $1,050 expired
($16,800-$0)/60 months = $280 per month

Diff: 2

Topic: The Worksheet; Adjustments

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Apply

AACSB: Analytic

AICPA: BB Industry; FN Reporting; FN Measurement

Read the description of following adjustments that are required at the end of the accounting period for Hubbard Repair Determine the account and amount to be debited and the account and amount to be credited.

Purchased supplies for $2,000 on November 1, Inventory of supplies was $600 on November 30, 2019. Record the adjustment for the amount of the supplies that were used during the month of November 2019.
Signed a 4-month contract for $2,400 of prepaid advertising on November 1, Record the adjustment for the amount of the advertising contract that expired during the month of November 2019.
Prepaid rent for the year on November 1, Rent expired during the month of November 2019, $1,500. Record the adjustment on November 30, 2019.
Depreciation is computed using the straight-line Equipment purchased on November 1, 2019, for $6,000 has an estimated useful life of 5 years with no salvage value. Record the adjustment on November 30, 2019.

Answer: A. Debit Supplies Expense, $1,400; credit Supplies, $1,400

Debit Advertising Expense, $600; credit Prepaid Advertising, $600
Debit Rent Expense, $1,500; credit Prepaid Rent, $1,500
Debit Depreciation Expense–Equipment, $100; credit Accumulated Depreciation–Equipment, $100

Explanation: A. $2,000 – $600 = $1,400

$2,400/4 = $600 per month
$1,500 expired
($6,000 – $0)/60 months = $100 per month

Diff: 2

Topic: The Worksheet; Adjustments

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Apply

AACSB: Analytic

AICPA: BB Industry; FN Reporting; FN Measurement

Read the description of following adjustments that are required at the end of the accounting period for Hubbard Repair Determine the account and amount to be debited and the account and amount to be credited.

Prepaid rent for the year on April 1, Rent expired during the month of April 2019, $3,500. Record the adjustment on April 30, 2019.
Purchased supplies for $2,000 on April 1, Inventory of supplies was $1,600 on April 30, 2019. Record the adjustment for the amount of the supplies that were used during the month of April 2019.
Depreciation is computed using the straight-line Equipment purchased on April 1, 2019, for $18,000 has an estimated useful life of 5 years with no salvage value. Record the adjustment on April 30, 2019.
Signed a 6-month contract for $2,400 of prepaid advertising on April 1, Record the adjustment for the amount of the contract that expired during the month of April 2019.

Answer:

Debit Rent Expense, $3,500; credit Prepaid Rent, $3,500
Debit Supplies Expense, $400; credit Supplies, $400
Debit Depreciation Expense–Equipment, $300; credit Accumulated Depreciation–Equipment, $300
Debit Advertising Expense, $400; credit Prepaid Advertising, $400

Explanation: A. $3,500 expired

$2,000 – $1,600 = $400
($18,000 – $0)/60 = $300 per month D. $2,400/6 = $400

Diff: 2

Topic: The Worksheet; Adjustments

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Apply

AACSB: Analytic

AICPA: BB Industry; FN Reporting; FN Measurement

Read the description of following adjustments that are required at the end of the accounting period for Drake Consulting Determine the account and amount to be debited and the account and amount to be credited.

Prepaid rent for one year on January 1, 2019, in the amount of $26,400. Record the adjustment on January 31,
Purchased supplies for $1,600 on January 1, The inventory of supplies was $400 on January 31, 2019. Record the adjustment for the amount of the supplies that were used during the month of January 2019.
Depreciation is computed using the straight-line Equipment purchased on January 1, 2019, for $36,000 has an estimated useful life of 6 years with no salvage value. Record the adjustment on January 31, 2019.
Signed a 12-month contract for $3,000 of prepaid advertising on January 1, Record the adjustment for the amount of the advertising contract that expired during the month of January 2019.

Answer: A. Debit Rent Expense, $2,200; credit Prepaid Rent, $2,200

Debit Supplies Expense, $1,200; credit Supplies, $1,200
Debit Depreciation Expense–Equipment, $500; credit Accumulated Depreciation–Equipment, $500
Debit Advertising Expense, $250; credit Prepaid Advertising, $250

Explanation: A. ($26,400/12 = $2,200 expired B. $1,600 – $400 = $1,200

($36,000 – $0)/72 months = $500 per month D. $3,000/12 = $250

Diff: 2

Topic: The Worksheet; Adjustments

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Apply

AACSB: Analytic

AICPA: BB Industry; FN Reporting; FN Measurement

Read the description of following adjustments that are required at the end of the accounting period for AAA Appliance Repair Record the necessary adjusting entries required at the end of January on page 2 of a general journal. Omit the descriptions.

Prepaid rent for the year on January 1, Rent expired during the month of January 2019,

$2,000.

Purchased supplies for $7,600 on January 1, Inventory of supplies was $1,600 on January 31, 2019.
Depreciation is computed using the straight-line Equipment purchased on January 1, 2019, for $15,000 has an estimated useful life of 5 years with no salvage value.
Signed a 3-month contract for $600 of prepaid advertising on January 1,

Answer: GENERAL JOURNAL

PAGE 2

DATE	DESCRIPTION	P.R.	DEBIT	CREDIT
1/31	Rent Expense		2,000
	Prepaid Rent			2,000

1/31	Supplies Expense		6,000
	Supplies			6,000

1/31	Depreciation Expense		250
	Accumulated Depreciation			250

1/31	Advertising Expense		200
	Prepaid Advertising			200

Explanation: A. $2,000 expired

$7,600 – $1,600 = $6,000 C. ($15,000 – $0)/60 = $250 D. $600/3 = $200

Diff: 2

Topic: Adjustments

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Apply

AACSB: Analytic

AICPA: BB Industry; FN Reporting; FN Measurement

Read the description of following adjustments that are required at the end of the accounting period for Anise’s Repair Record the necessary adjusting entries required at the end of January on page 2 of a general journal. Omit the descriptions.

Prepaid rent for the year on January 1, Rent expired during the month of January 2019,

$1,600.

Purchased supplies for $4,000 on January 1, Inventory of supplies was $1,200 on January 31, 2019.
Depreciation is computed using the straight-line Equipment purchased on January 1, 2019, for $3,000 has an estimated useful life of 5 years with no salvage value.
Signed a 3-month contract for $450 of prepaid advertising on January 1,

Answer: GENERAL JOURNAL

PAGE 2

DATE	DESCRIPTION	P.R.	DEBIT	CREDIT
1/31	Rent Expense		1,600
	Prepaid Rent			1,600

1/31	Supplies Expense		2,800
	Supplies			2,800

1/31	Depreciation Expense		50
	Accumulated Depreciation			50

1/31	Advertising Expense		150
	Prepaid Advertising			150

Explanation: A. $1,600 expired

$4,000 – $1,200 = $2,800 C. ($3,000 – $0)/60 = $50 D. $450/3 = $150

Diff: 2

Topic: Adjustments

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Apply

AACSB: Analytic

AICPA: BB Industry; FN Reporting; FN Measurement

Read the description of following adjustments that are required at the end of the accounting period for Paulo Consulting Record the necessary adjusting entries required at the end of January on page 2 of a general journal. Omit the descriptions.

Equipment was purchased on January 1, 2019, for $60,000 and has an estimated useful life of 7 years with a salvage value of $3,720. Depreciation is computed using the straight-line
Signed a 5-month contract for $4,500 of prepaid advertising on January 1,
Prepaid rent for the year on January 1, 2019, in the amount of $22,200.
Purchased supplies for $3,200 on January 1, Inventory of supplies was $2,800 on January 31, 2019.

Answer: GENERAL JOURNAL

PAGE 2

DATE	DESCRIPTION	P.R.	DEBIT	CREDIT
1/31	Depreciation Expense		670
	Accumulated Depreciation			670

1/31	Advertising Expense		900
	Prepaid Advertising			900

1/31	Rent Expense		1,850
	Prepaid Rent			1,850

1/31	Supplies Expense		400
	Supplies			400

Explanation: A. ($60,000 – $3,720)/84 = $670 B. $4,500/5 = $900

$22,200/12 = $1,850 expired D. $3,200 – $2,800 = $400

Diff: 2

Topic: Adjustments

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Apply

AACSB: Analytic

AICPA: BB Industry; FN Reporting; FN Measurement

Read the description of following adjustments that are required at the end of the accounting period for River Front Record the necessary adjusting entries required at the end of January on page 2 of a general journal. Omit the descriptions.

Prepaid rent for the year on January 1, Rent expired during the month of January, $7,200.
Equipment purchased on January 1, 2019, for $8,100 has an estimated useful life of 5 years with no salvage Depreciation is computed using the straight-line method.
Purchased supplies for $650 on January 1, Inventory of supplies was $100 on January 31, 2019.
Signed a 12-month contract for $4,800 of prepaid advertising on January 1,

Answer: GENERAL JOURNAL PAGE 2

DATE	DESCRIPTION	P.R.	DEBIT	CREDIT
1/31	Rent Expense		7,200
	Prepaid Rent			7,200

1/31	Depreciation Expense		135
	Accumulated Depreciation			135

1/31	Supplies Expense		550
	Supplies			550

1/31	Advertising Expense		400
	Prepaid Advertising			400

Explanation: A. $7,200 expired

($8,100 – $0)/60 = $135 C. $650 – $100 = $550
$4,800/12 = $400

Diff: 2

Topic: Adjustments

Learning Objective: 05-02 Prepare adjustments for unrecorded business transactions. Bloom’s: Apply

AACSB: Analytic

AICPA: BB Industry; FN Reporting; FN Measurement

The balances of the ledger accounts for Oleman Services on January 31, 2019, and the information needed for adjustments are shown Prepare the Trial Balance section, record the adjustments, and complete the worksheet.

Account Name	Balance
Cash	$6,500
Accounts Receivable	3,500
Supplies	1,200
Prepaid Insurance	3,000
Equipment	7,500
Accumulated Depreciation -Equipment	—
Accounts Payable	3,400
Jeff Oleman, Capital	17,500
Jeff Oleman, Drawing	1,500
Fees Income	9,500
Advertising Expense	600
Rent Expense	1,200
Salaries Expense	54,7000

Salaries Expense 5,000

Supplies Expense —

Insurance Expense —

Utilities Expense 400

Depreciation Expense – Equipment —

Adjustment information:

The supplies were purchased on January 1, An inventory of supplies showed $600 on hand on January 31, 2019.
The amount of Prepaid Insurance represents a payment made January 1, 2019, for a six-month insurance
The equipment, purchased January 1, 2019, has an estimated useful life of 5 years with no salvage The firm uses the straight-line method of depreciation.

OLEMAN SERVICES
Worksheet
Month Ended January 31, 2019

		TRIAL BALANCE		ADJUSTMENTS
	ACCOUNT NAME	DEBIT	CREDIT	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

OLEMAN SERVICES
Worksheet (Continued)
Month Ended January 31, 2019

		ADJ. TRIAL BAL.		INCOME STATEMENT		BALANCE SHEET
	DEBIT		CREDIT	DEBIT	CREDIT	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

Answer: OLEMAN SERVICES

Worksheet
Month Ended January 31, 2019

		TRIAL BALANCE		ADJUSTMENTS
	ACCOUNT NAME	DEBIT	CREDIT	DEBIT	CREDIT
1	Cash	6,500
2	Accounts Receivable	3,500
3	Supplies	1,200			(a) 600
4	Prepaid Insurance	3,000			(b) 500
5	Equipment	7,500

5	Equipment	7,500
6	Accum. Depr.–Equip.				(c) 125
7	Accounts Payable		3,400
8	Jeff Oleman, Capital		17,500
9	Jeff Oleman, Drawing	1,500
10	Fees Income		9,500
11	Advertising Expense	600
12	Rent Expense	1,200
13	Salaries Expense	5,000
14	Supplies Expense			(a) 600
15	Insurance Expense			(b) 500
16	Utilities Expense	400
17	Depr. Exp.–Equip.			(c) 125
17	Depr. Exp.–Equip.			(c) 125
18	Totals	30,400	30,400	1,225	1,225
19	Net Income
20

Answer:

OLEMAN SERVICES
Worksheet (Continued)
Month Ended January 31, 2019

		ADJ. TRIAL BAL.		INCOME STATEMENT		BALANCE SHEET
	DEBIT		CREDIT	DEBIT	CREDIT	DEBIT	CREDIT
1	6,500					6,500
2	3,500					3,500
3	600					600
4	2,500					2,500
5	7,500					7,500
6			125				125
7			3,400				3,400
8			17,500				17,500
9	1,500					1,500
10			9,500		9,500
11	600			600
12	1,200			1,200
13	5,000			5,000
14	600			600
15	500			500
16	400			400
17	125			125

Answer: 17 125 125

18 30,525 30,525 8,425 9,500 22,100 21,025

19 1,075 1,075

20 9,500 9,500 22,100 22,100

Explanation: A. $1,200 – $600 = $600

$3,000/6 = $500
($7,500 – $0)/60 = $125

Diff: 3

Topic: The Worksheet; Adjustments

Learning Objective: 05-01 Complete a trial balance on a worksheet.; 05-02 Prepare adjustments for unrecorded business transactions.; 05-03 Complete the worksheet.

Bloom’s: Create AACSB: Analytic

AICPA: BB Industry; BB Critical Thinking; FN Reporting; FN Measurement; FN Decision Making

The balances of the ledger accounts for Buffet Services on September 30, 2019, and the information needed for adjustments are shown Prepare the Trial Balance section, record the adjustments, and complete the worksheet.

Account Name	Balance
Cash	$13,000
Accounts Receivable	7,000
Supplies	2,400
Prepaid Insurance	6,000
Equipment	15,000
Accumulated Depreciation – Equipment	—
Accounts Payable	6,800
Jane Buffet, Capital	35,000
Jane Buffet, Drawing	3,000
Fees Income	19,000
Advertising Expense	1,200
Rent Expense	2,400
Salaries Expense	10,000
Supplies Expense	—
Insurance Expense	—
Utilities Expense	800
Depreciation Expense – Equipment	—

Adjustment information:

The supplies were purchased on September 1, An inventory of supplies showed $1,200 on hand on September 30, 2019.
The amount of Prepaid Insurance represents a payment made September 1, 2019, for a six-month

insurance policy.

The equipment, purchased September 1, 2019, has an estimated useful life of 5 years with no salvage The firm uses the straight-line method of depreciation.

BUFFET SERVICES
Worksheet
Month Ended September 30, 2019

		TRIAL BALANCE		ADJUSTMENTS
	ACCOUNT NAME	DEBIT	CREDIT	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

BUFFET SERVICES
Worksheet (Continued)
Month Ended September 30, 2019

		ADJ. TRIAL BAL.		INCOME STATEMENT		BALANCE SHEET
	DEBIT		CREDIT	DEBIT	CREDIT	DEBIT	CREDIT
1
2
3				52

3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

BUFFET SERVICES
Worksheet
Month Ended September 30, 2019

		TRIAL BALANCE		ADJUSTMENTS
	ACCOUNT NAME	DEBIT	CREDIT	DEBIT	CREDIT
1	Cash	$13,000
2	Accounts Receivable	7,000
3	Supplies	2,400			(a) 1,200
4	Prepaid Insurance	6,000			(b) 1,000
5	Equipment	15,000
6	Accum. Depr.–Equip.				(c) 250
7	Accounts Payable		6,800
8	Jane Buffet, Capital		35,000
9	Jane Buffet, Drawing	3,000
10	Fees Income		19,000
11	Advertising Expense	1,200
12	Rent Expense	2,400
13	Salaries Expense	10,000
14	Supplies Expense	— 53		(a) 1,200

Answer:

Answer: 14 Supplies Expense — (a) 1,200

Insurance Expense — (b) 1,000
Utilities Expense 800

17 Depr. Exp.–Equip. — (c) 250 18 Totals 60,800 60,800 2,450 2,450

19 Net Income 20

BUFFET SERVICES

Worksheet (Continued) Month Ended January 31, 2019

ADJ. TRIAL BAL. INCOME STATEMENT BALANCE SHEET DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT

1 $13,000 13,000

2 7,000 7,000

3 1,200 1,200

4 5,000 5,000

5 15,000 15,000

6 250 250

7 6,800 6,800

8 35,000 35,000

9 3,000 3,000

10 19,000 19,000

11 1,200 1,200

12 2,400 2,400

13 10,000 10,000

14 1,200 1,200

15 1,000 1,000

16 800 800

17 250 250

18 61,050 61,050 16,850 19,000 44,200 42,050

19 2,150 2,150

20 19,000 19,000 44,200 44,200

Explanation: A. $2,400 – $1,200 = $1,200

$6,000/6 = $1,000
($15,000 – $0)/60 = $250

ADinffs: w3 er:

Topic: The Worksheet; Adjustments

Learning Objective: 05-01 Complete a trial balance on a worksheet.; 05-02 Prepare adjustments for unrecorded business transactions.; 05-03 Complete the worksheet.

Bloom’s: Apply AACSB: Analytic

AICPA: BB Critical Thinking; BB Industry; FN Reporting; FN Measurement; FN Decision Making

The balances of the ledger accounts for Lance’s Landscaping Design on March 31, 2019, and the information needed for adjustments are shown Prepare the Trial Balance section, record the adjustments, and complete the worksheet.

Account Name	Balance
Cash	$3,250
Accounts Receivable	1,750
Supplies	600
Prepaid Insurance	1,500
Equipment	3,000
Accumulated Depreciation – Equipment	—
Accounts Payable	950
Lance, Capital	8,750
Lance, Drawing	750
Fees Income	4,750
Advertising Expense	300
Rent Expense	600
Salaries Expense	2,500
Supplies Expense	—
Insurance Expense	—
Utilities Expense	200
Depreciation Expense – Equipment	—

Adjustment information:

The supplies were purchased on March 1, 2019 An inventory of supplies showed $300 on hand on March 31,
The amount of Prepaid Insurance represents a payment made March 1, 2019, for a six-month insurance
The equipment, purchased March 1, 2019, has an estimated useful life of 5 years with no salvage The firm uses the straight-line method of depreciation.

LANCE’S LANDSCAPING DESIGN
Worksheet
Month Ended March 31, 2019

	TRIAL BALANCE	ADJUSTMENTS

		TRIAL BALANCE		ADJUSTMENTS
	ACCOUNT NAME	DEBIT	CREDIT	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

LANCE’S LANDSCAPING DESIGN
Worksheet (Continued)
Month Ended March 31, 2019

		ADJ. TRIAL BAL.		INCOME STATEMENT		BALANCE SHEET
	DEBIT		CREDIT	DEBIT	CREDIT	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9
10

10
11
12
13
14
15
16
17
18
19
20

LANCE’S LANDSCAPING DESIGN
Worksheet
Month Ended March 31, 2019

		TRIAL BALANCE		ADJUSTMENTS
	ACCOUNT NAME	DEBIT	CREDIT	DEBIT	CREDIT
1	Cash	3,250
2	Accounts Receivable	1,750
3	Supplies	600			(a) 300
4	Prepaid Insurance	1,500			(b) 250
5	Equipment	3,000
6	Accum. Depr.–Equip.				(c) 50
7	Accounts Payable		950
8	Lance, Capital		8,750
9	Lance, Drawing	750
10	Fees Income		4,750
11	Advertising Expense	300
12	Rent Expense	600
13	Salaries Expense	2,500
14	Supplies Expense	—		(a) 300
15	Insurance Expense	—		(b) 250
16	Utilities Expense	200
17	Depr. Exp.–Equip.	—		(c) 50
18	Totals	14,450	14,450	600	600
19	Net Income
20

Answer:

Worksheet

LANCE’S LANDSCAPING DESIGN

Month Ended March 31, 2019

TRIAL BALANCE ADJUSTMENTS ACCOUNT NAME DEBIT CREDIT DEBIT CREDIT

1 Cash 3,250

Accounts Receivable 1,750
Supplies 600 (a) 300
Prepaid Insurance 1,500 (b) 250
Equipment 3,000
Depr.–Equip. (c) 50
Accounts Payable 950
Lance, Capital 8,750
Lance, Drawing 750
Fees Income 4,750
Advertising Expense 300
Rent Expense 600
Salaries Expense 2,500
Supplies Expense — (a) 300
Insurance Expense — (b) 250
Utilities Expense 200
Exp.–Equip. — (c) 50 18 Totals 14,450 14,450 600 600

19 Net Income 20

Explanation: A. $600 – $300 = $300

$1,500/6 = $250
($3,000 – $0)/60 = $50

Diff: 3

Topic: The Worksheet; Adjustments

Learning Objective: 05-01 Complete a trial balance on a worksheet.; 05-02 Prepare adjustments for unrecorded business transactions.; 05-03 Complete the worksheet.

Bloom’s: Create AACSB: Analytic

AICPA: BB Critical Thinking; BB Industry; FN Reporting; FN Measurement; FN Decision Making

The partial worksheet for the Lorado Insurance Agency for the month ended October 31, 2019, is shown Using this data, prepare an income statement, a statement of owner’s equity, and a balance sheet. The owner made no additional investments during the month.

INCOME STATEMENT BALANCE SHEET ACCOUNT NAME DEBIT CREDIT DEBIT CREDIT

Cash 9,000

Accounts Receivable 11,000

Supplies 5,500

Equipment 30,000

Accum. Depr.–Equip. 8,000

Accounts Payable 9,000

Ashleigh Lorado, Capital 32,000

Ashleigh Lorado, Drawing 2,000

Fees Income 23,300

Salaries Expense 12,200

Rent Expense 1,000

Supplies Expense 600

Depr. Exp.–Equip. 1,000

Totals 14,800 23,300 57,500 49,000

Net Income 8,500 8,500 23,300 23,300 57,500 57,500

Answer: LORADO INSURANCE AGENCY

Income Statement Month Ended October 31, 2019

Revenue
Fees Income		$23,300
Expenses
Salaries Expense	$12,200
Rent Expense	1,000
Supplies Expense	600
Depreciation Expense–Equipment	1,000
Total Expenses		14,800
Net Income		$ 8,500

LORADO INSURANCE AGENCY

Statement of Owner’s Equity Month Ended October 31, 2019

Ashleigh Lorado, Capital, Oct. 1, 2019		$32,000
Net Income for October 59	$8,500

Net Income for October	$8,500
Less Withdrawals for October	2,000
Increase in Capital		6,500
Ashleigh Lorado, Capital, Oct. 31, 2019		$38,500

Answer:

Balance Sheet October 31, 2019

LORADO INSURANCE AGENCY

ASSETS
Cash		$9,000
Accounts Receivable		11,000
Supplies		5,500
Equipment	$30,000
Less: Accumulated Depreciation	8,000	22,000
Total Assets		$47,500



LIABILITIES AND OWNER’S EQUITY
Liabilities
Accounts Payable		9,000
Owner’s Equity
Ashleigh Lorado, Capital		38,500
Total Liabilities and Owner’s Equity		$47,500

Explanation:

Diff: 2

Topic: Financial Statements

Learning Objective: 05-04 Prepare an income statement, statement of owner’s equity, and balance sheet from the completed worksheet. Bloom’s: Create

AACSB: Analytic

AICPA: BB Critical Thinking; BB Industry; FN Reporting; FN Measurement; FN Decision Making

The partial worksheet for the Marion Consulting Services for the month ended January 31, 2019, is shown Using this data, prepare an income statement, a statement of owner’s equity, and a balance sheet. The owner made no additional investments during the month.

	INCOME STATEMENT		BALANCE SHEET
ACCOUNT NAME	DEBIT	CREDIT	DEBIT	CREDIT
Cash			18,000
Accounts Receivable			22,000
Supplies			11,000
Equipment			60,000
Accum. Depr.–Equip.		60		16,000

Accum. Depr.–Equip. 16,000

Accounts Payable 18,000

Mary Marion, Capital 64,000

Mary Marion, Drawing 4,000

Fees Income 46,600

Salaries Expense 24,400

Rent Expense 2,000

Supplies Expense 1,200

Depr. Exp.–Equip. 2,000

Totals 29,600 46,600 115,000 98,000

Net Income 17,000 17,000 46,600 46,600 115,000 115,000

Answer: MARION CONSULTING SERVICES

Income Statement Month Ended January 31, 2019

Revenue
Fees Income		$46,600
Expenses
Salaries Expense	$24,400
Rent Expense	2,000
Supplies Expense	1,200
Depreciation Expense–Equipment	2,000
Total Expenses		29,600
Net Income		$ 17,000

MARION CONSULTING SERVICES

Statement of Owner’s Equity Month Ended January 31, 2019

Mary Marion, Capital, Jan. 1, 2019		$64,000
Net Income for January	$17,000
Less Withdrawals for January	4,000
Increase in Capital		13,000
Mary Marion, Capital, Jan. 31, 2019		$77,000

Balance Sheet January 31, 2019 ASSETS

MARION CONSULTING SERVICES

ASSETS
Cash		$18,000
Accounts Receivable		22,000
Supplies		11,000
Equipment	$60,000
Less Accumulated Depreciation	16,000	44,000
Total Assets		$95,000



LIABILITIES AND OWNER’S EQUITY
Liabilities
Accounts Payable		18,000
Owner’s Equity
Mary Marion, Capital		77,000
Total Liabilities and Owner’s Equity		$95,000

Answer:

Explanation:

Diff: 2

Topic: Financial Statements

Learning Objective: 05-04 Prepare an income statement, statement of owner’s equity, and balance sheet from the completed worksheet. Bloom’s: Create

AACSB: Analytic

AICPA: BB Critical Thinking; BB Industry; FN Reporting; FN Measurement; FN Decision Making

Match the accounting terms with the description by entering the proper letter in the space

Account form balance sheet
Adjusting entries or adjustments
Book value
Contra account
Contra asset account
Depreciation
Prepaid expenses
Report form balance sheet
Salvage value
Straight-line depreciation
Worksheet

Allocation of an asset’s cost in equal amounts to each accounting period of the asset’s useful life
Journal entries made to update accounts for items that were used or expired during the accounting period

________ 3. An estimate of the amount that could be received by selling or disposing of an asset at the end of its useful life

________ 4. A balance sheet that lists assets on the left and liabilities and owner’s equity on the right

An account with a normal balance that is opposite that of a related account

________ 6. A form used to gather all data needed at the end of an accounting period to prepare financial statements

________ 7. That portion of an asset’s original cost that has not yet been depreciated

________ 8. Expense items acquired, recorded, and paid for in advance of their use

________ 9. An asset account with a credit balance, which is contrary to the normal balance of an asset account

A balance sheet that lists the asset accounts first, followed by liabilities and owner’s equity

________ 11. Allocation of the cost of a long-term asset to operations during its expected useful life

Answer: (1) J, (2) B, (3) I, (4) A, (5) D, (6) K, (7) C, (8) G, (9) E, (10) H, (11) F

Explanation:

Diff: 2

Topic: The Worksheet; Assets, Liabilities, Equity; Adjustments; Financial Statements

Learning Objective: 05-01 Complete a trial balance on a worksheet.; 05-02 Prepare adjustments for unrecorded business transactions.; 05-03 Complete the worksheet.; 05-04 Prepare an income statement, statement of owner’s equity, and balance sheet from the completed worksheet.; 05-06

Bloom’s: Remember AACSB: Analytic

AICPA: BB Industry; FN Reporting; FN Measurement; FN Decision Making

College Accounting John Price 15e - Test Bank

Description

Additional Information

Reviews

MULTIPLE CHOICE QUESTIONS

A) True

A) True

3) If the adjustment for supplies used is not recorded, the firm’s assets will be overstated.

4) If the adjustment for expired rent is not recorded, the firm’s expenses will be overstated.

5) The normal balance of a contra asset account is a debit.

A) True

7) Land is a long-term asset that is not subject to depreciation.

A) True

A) True

A) True

A) True

12) The balance of a liability account is extended to the Balance Sheet Credit column of the worksheet.

A) True

A) True

15) Which of the following need not be completed separately if a worksheet is prepared?

16) When a trial balance is in balance,

A) debit Supplies Expense $700; credit Supplies $700

A) debit Supplies $2,200; credit Supplies Expense $2,200

A) $1,200. B) $4,000. C) $9,600. D) $10,400.

20) Adjusting Entries are:

A) $520 B) $1,560 C) $1,125 D) $1,040

A) Debit Depreciation; credit Depreciation Expense

A)

B)

C)

D)

Answer: D

C) ($5,000-0)/5 years = $1,000 D) ($5,000-0)/5 years = $1,000

A) $3,600 B) $14,400 C) $7,200 D) $10,800

A) debit Prepaid Insurance $110; credit Insurance Expense $110

A) debit Rent Expense $4,800; credit Prepaid Rent $4,800

A) $12. B) $600. C) $60. D) $720.

Explanation: A) ($6,000 – $0)/60 months = $100 per month; 5 months * $100 = $500

29) On a worksheet, the adjusting entry to account for depreciation of equipment consists of:

30) If the prepaid expenses are not adjusted, assets on the balance sheet:

31) If long-term assets are not adjusted, expenses on the income statement:

A) a $4,000 credit to Prepaid Rent. B) a $8,000 credit to Rent Expense.

A) a $6,000 debit to Prepaid Rent; a $6,000 credit to Rent Expense.

A)

B)

C)

D)

Answer: D

C) $18,000/12 months = $1,500 per month; ($1,500 * 6 months = $9,000) D) $18,000/12 months = $1,500 per month; ($1,500 * 6 months = $9,000)

A)

B)

C)

D)

Answer: B

36) The adjusting entry to account for the use of supplies consists of:

A)

B)

C)

D)

Answer: C

C) $1,000 – $350 = $650 of supplies had been used.

A) $500 B) $1,600 C) $1,100 D) $2,100

39) Adjusting entries can be journalized:

40) The adjusting entry to account for the expiration of prepaid insurance consists of:

41) The adjusting entry to account for the expiration of prepaid advertising consists of:

42) Which of the following statements is not correct?

Answer: C Explanation: A)

43) On a worksheet, the adjusted balance of the Accumulated Depreciation account is extended to:

44) On a worksheet, the adjusted balance of the Depreciation Expense account is extended to:

45) On a worksheet, the adjusted balance of the Supplies account is extended to:

46) On a worksheet, the adjusted balance of the Supplies Expense account is extended to:

47) Which of the following statements is correct?

B) The cost of supplies used is reported on the statement of owner’s equity.

48) On a worksheet, the adjusted balance of the Prepaid Rent account is extended to the:

49) On a worksheet, the adjusted balance of the revenue account Fees Income would be extended to:

50) On the worksheet, the Balance Sheet columns should balance:

51) On a worksheet, the adjusted balance of a contra asset account would be extended to:

52) On a worksheet, a net loss is:

53) If a worksheet is prepared at the end of the accounting year,

54) Which of the following statements is not correct?