Chapter 3

Question 1

94. On October 1, Seaview Apartments received $6,000 from a tenant for four months’ rent. The receipt was credited to Unearned Rent Revenue. What adjusting entry is needed on December 31 ?
    A. Debit 1,500 under Unearned Rent Revenue. Credit 1,500 under Rent Revenue
    B. Debit 4,500 under Cash. Credit 4,500 under Rent Revenue
    C. Debit 1,500 under Rent Revenue. Credit 1,500 under Unearned Rent Revenue
    D. Debit 4,500 under Unearned Rent Revenue. Credit 4,500 under Rent Revenue

Answer 1

D

Question 2

95.	Equipment of $150,000, Accumulated depreciation equipment of $22,500 and Depreciation expenses equipment of $7,500  appear on the adjusted trial balance of Park National Company. The carrying amount of the equipment is
A.	$120,000
B.	$127,500
C.	$142,500
D.	$150,000

Answer 2

Answer: B
Chapter: 3
Explanation: Carrying amount = Equipment – Accumulated Depreciation
$150,000 - $22,500 = $127,500

Question 3

96.	Pisces, Inc., purchased supplies for $1,300 during 20X6. At the year-end, Pisces had $800 of supplies left. The adjusting entry should
A.	Credit Supplies $800
B.	Debit Supplies $500
C.	Debit Supplies Expense $500
D.	Debit Supplies Expense $800

Answer 3

C

Question 4

97. The accountant for Starter Corp. failed to make the adjusting entry to record depreciation for the current year. The effect of this error is which of the following?
    A. Assets are overstated; shareholders’ equity and net income are understated
    B. Assets, net income, and shareholders’ equity are all overstated
    C. Assets and expenses are understated; net income is understated
    D. Net income is overstated and liabilities are understated

Answer 4

B

Question 5

98. Interest earned on a note receivable at December 31 equals $400. What adjusting entry is required to accrue this interest?
    A. Debit 400 under Interest Receivable. Credit 400 under Interest Revenue
    B. Debit 400 under Interest Expense. Credit 400 under Cash
    C. Debit 400 under Interest Expense. Credit 400 under Interest Payable
    D. Debit 400 under Interest Payable. Credit 400 under Interest Expense

Answer 5

B

Question 6

99. If a real estate company fails to accrue commission revenue,
    A. Revenues are understated and net income is overstated
    B. Net income is understated and shareholders’ equity is overstated
    C. Liabilities are overstated and owners’ equity is understated
    D. Assets are understated and net income is understated

Answer 6

D

Question 7

101.	The account Unearned Revenue is a(n)
A.	Revenue
B.	Asset
C.	Liability
D.	Expense

Answer 7

C

Question 8

An adjusting entry for prepaid expenses results in ________ to an expense account and ________ to an asset account

Answer 8

An adjusting entry for prepaid expenses results in an increase (debit) to an expense account and a decrease (credit) to an asset account

Question 9

The purchase of supplies results in _________ to an asset account

Answer 9

Increase (debit)

Question 10

The cost of insurance paid in advance is recorded as _____ in the asset account prepaid insurance. At the financial statement date, companies _______ insurance expense and _______ prepaid insurance

Answer 10

an increase (debit)
increase (debit)
decrease (credit)

Question 11

When companies receive cash before services are performed they record ______ by _______ a _______ account called unearned revenues.

Answer 11

A liability
increasing (crediting)
liability

Question 12

The adjusting entry for unearned revenues results in _______ to a liability account and ______ to a revenue account

Answer 12

a decrease (debit)
an increase (credit)

Question 13

Name examples for unearned revenues

Answer 13

rent, magazine subscriptions, deposits

Question 14

When accounting for prepaid expenses, the adjusting entry consists of _____ expenses and ______ assets

Answer 14

debiting

crediting

Question 15

When accounting for unearned revenues, you ______ liabilities and ______ revenues

Answer 15

debit

credit

Question 16

An adjusting entry for accrued revenues results in ______ to an asset account and an ______ to a revenue account

Answer 16

an increase (a debit)
an increase (a credit)

Question 17

When accounting for accrued revenues, the adjusting entry consists of _____ Assets and _____ Revenues

Answer 17

debiting

crediting

Question 18

Expenses incurred but not yet paid or recorded are called _____

Answer 18

Accrued expenses

Question 19

An adjusting entry for accrued expenses results in _______ to an expense account and _______ to a liability account

Answer 19

an increase (debit)
an increase (credit)

Question 20

When accounting for accrued expenses, the adjusting entry consists of _____ expenses and ______ liabilities

Answer 20

debiting

crediting

Question 21

103.An adjusting entry that debits an expense and credits a liability is which type of expense? 
A.Accrued expense
B.Cash expense
C.Prepaid expense
D.Depreciation expense

Answer 21

A

Question 22

106.Which of the following accounts is not closed? 
A.Accumulated Depreciation
B.Dividends
C.Interest Revenue
D.Depreciation Expense

Answer 22

A

Question 23

109.A major purpose of preparing closing entries is to:
A.Close the liabilities accounts
B.Adjust the asset accounts to their correct current balances
C.Update the retained earnings account
D.Record the dividends

Answer 23

C

Question 24

111.Earnings a revenue and immediately collecting the related cash will:
A.Increase owner’s equity
B.Have no effect on total assets
C.Increase liabilities
D.Have no effect on net assets

Answer 24

A

Question 25

115.An expense incurred in 2016 is not paid until 2017. Using the accrual basis of accounting, the expense should appear on: A.The 2016 income statement B.The 2017 income statement C.Neither the 2016 not the 2017 income statement D.Both the 2016 and 2017 income statements

Answer 25

A