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Exam 3: The Adjusting Process

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Question 91

True/False

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The financial statements measure precisely the financial condition and results of operations of a business.

A) True
B) False

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Question 92

Multiple Choice

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The entry to adjust the accounts for wages accrued at the end of the accounting period is

A) debit Wages Payable; credit Wages Income
B) debit Wages Income; credit Wages Payable
C) debit Wages Payable; credit Wages Expense
D) debit Wages Expense; credit Wages Payable

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

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Question 93

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

A business pays bi-weekly salaries of $20,000 every other Friday for a ten-day period ending on that day. The last pay day of December is Friday, December 27. Assuming the next pay period begins on Monday, December 30 and the proper adjusting entry is journalized at the end of the fiscal period (December 31). Journalize the entry for the payment of the payroll on Friday, January 10.

Which account would normally not require an adjusting entry?

By ignoring and not posting the adjusting journal entries to the appropriate accounts, net income will always be overstated.

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

A business pays bi-weekly salaries of $20,000 every other Friday for a ten-day period ending on that day. The adjusting entry necessary at the end of the fiscal period ending on the second Wednesday of the pay period includes a:

Austin, Inc. made a Prepaid Rent payment of $3,500 on January 1st. The company's monthly rent is $700. The amount of Prepaid Rent that would appear on the January 31 balance sheet after adjustment is:

On January 1, DogMart Company purchased a two-year liability insurance policy for $22,800 cash. The purchase was recorded to Prepaid Insurance. Prepare the January 31 adjusting entry.

At the end of the fiscal year, the following adjusting entries were omitted: Assuming that financial statements are prepared before the errors are discovered, indicate the effect of each error, considered individually, by inserting the dollar amount in the appropriate spaces. Insert "0" if the error does not affect the item.

If the adjustment of the unearned rent account at the end of the period to recognize the amount of rent earned is inadvertently omitted, the net income for the period will be understated.

The cost of office supplies to be used in future periods is ordinarily shown on the balance sheet as a(n)

For the year ending December 31, 2010, Nathan Clinical Supplies Co. mistakenly omitted adjusting entries for (1) $8,900 of unearned revenue that was earned, (2) earned revenue that was not billed of $10,200, and (3) accrued wages of $7,000. Indicate the combined effect of the errors on (a) revenues, (b) expenses, and (c) net income for 2010.

A contra asset account for Land will normally appear in the balance sheet.

The balance in the prepaid rent account before adjustment at the end of the year is $32,000, which represents four months' rent paid on December 1. The adjusting entry required on December 31 is

On January 1st, Great Designs Company had a debit balance of $1,450 in the Office Supplies account. During the month, Great Designs purchased $115 and $160 of office supplies and journalized them to the Office Supplies asset account upon purchasing. On January 31st, an inspection of the office supplies cabinet shows that only $350 of Office Supplies remains in the locker. Prepare the January 31st adjusting entry for Office Supplies.

The difference between the balance of a fixed asset account and the related accumulated depreciation account is termed

The matching concept requires expenses be recorded in the same period that the related revenue is recorded.

Classify the following items