Chapter 3—The Matching Concept and the Adjusting Process
19. The balance in the office supplies account on June 1 was $5,200, supplies purchased during
June were $2,500, and the supplies on hand at June 30 were $2,000. The amount to be used for the appropriate adjusting entry is a. $4,500 b. $2,500 c. $9,700 d. $5,700
ANS: D DIF: 4 OBJ: 03
20. What is the proper adjusting entry at June 30, the end of the fiscal year, based on a prepaid
insurance account balance before adjustment, $15,500, and unexpired amounts per analysis of policies, $4,500?
a. debit Insurance Expense, $4,500; credit Prepaid Insurance, $4,500 b. debit Insurance Expense, $15,500; credit Prepaid Insurance, $15,500 c. debit Prepaid Insurance, $11,500; credit Insurance Expense, $11,500 d. debit Insurance Expense, $11,000; credit Prepaid Insurance, $11,000
ANS: D DIF: 4 OBJ: 03
21. The entry to adjust for the cost of supplies used during the accounting period is
a. Supplies Expense, debit; Supplies, credit b. James Smith, Capital, debit; Supplies, credit c. Accounts Payable, debit; Supplies, credit d. Supplies, debit; credit James Smith, Capital
ANS: A DIF: 3 OBJ: 03
22. A business pays weekly salaries of $20,000 on Friday for a five-day week ending on that day.
The adjusting entry necessary at the end of the fiscal period ending on Thursday is a. debit Salaries Payable, $16,000; credit Cash, $16,000 b. debit Salary Expense, $16,000; credit Drawing, $16,000
c. debit Salary Expense, $16,000; credit Salaries Payable, $16,000 d. debit Drawing, $16,000; credit Cash, $16,000
ANS: C DIF: 4 OBJ: 03
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Chapter 3—The Matching Concept and the Adjusting Process
23. The balance in the prepaid insurance account before adjustment at the end of the year is $10,000.
If the additional data for the adjusting entry is (1) \year is $8,500,\applicable to a future period is $1,500,\
a. the debit and credit amount for (1) would be the same as (2) but the accounts would be different
b. the accounts for (1) would be the same as the accounts for (2) but the amounts would be different
c. the accounts and amounts would be the same for both (1) and (2)
d. there is not enough information given to determine the correct accounts and amounts
ANS: C DIF: 4 OBJ: 03
24. The difference between the balance of a fixed asset account and the related accumulated
depreciation account is termed a. historical cost b. contra asset c. book value d. market value
ANS: C DIF: 2 OBJ: 03
25. The adjusting entry to record the depreciation of equipment for the fiscal period is
a. debit Depreciation Expense; credit Equipment
b. debit Depreciation Expense; credit Accumulated Depreciation c. debit Accumulated Depreciation; credit Depreciation Expense d. debit Equipment; credit Depreciation Expense
ANS: B DIF: 3 OBJ: 03
26. As time passes, fixed assets other than land lose their capacity to provide useful services. To
account for this decrease in usefulness, the cost of fixed assets is systematically allocated to expense through a process called a. equipment allocation b. depreciation c. accumulation d. matching
ANS: B DIF: 1 OBJ: 03
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Chapter 3—The Matching Concept and the Adjusting Process
27. The net income reported on the income statement is $90,000. However, adjusting entries have
not been made at the end of the period for supplies expense of $2,700 and accrued salaries of $1,300. Net income, as corrected, is a. $87,300 b. $90,000 c. $88,700 d. $86,000
ANS: D DIF: 2 OBJ: 03
28. The entry to adjust the accounts for wages accrued at the end of the accounting period is
a. Wages Payable, debit; Wages Income, credit b. Wages Income, debit; Wages Payable, credit c. Wages Payable, debit; Wages Expense, credit d. Wages Expense, debit; Wages Payable, credit
ANS: D DIF: 3 OBJ: 03
29. The supplies account has a balance of $1,000 at the beginning of the year and was debited
during the year for $2,800, representing the total of supplies purchased during the year. If $750 of supplies are on hand at the end of the year, the supplies expense to be reported on the income statement for the year is a. $750 b. $3,550 c. $3,800 d. $3,050
ANS: D DIF: 3 OBJ: 03
30. A company purchases a one-year insurance policy on June 1 for $840. The adjusting entry on
December 31 is
a. debit Insurance Expense, $350 and credit Prepaid Insurance, $350 b. debit Insurance Expense, $280 and credit Prepaid Insurance, $280 c. debit Insurance Expense, $490, and credit Prepaid Insurance, $ 490. d. debit Prepaid Insurance, $720, and credit Cash, $720
ANS: C DIF: 4 OBJ: 03
31. If the prepaid rent account before adjustment at the end of the month has a debit balance of
$1,600, representing a payment made on the first day of the month, and if the monthly rent was $800, the amount of prepaid rent that would appear on the balance sheet at the end of the month, after adjustment, is
73
Chapter 3—The Matching Concept and the Adjusting Process
32.
33.
34.
35.
36.
a. $800 b. $400 c. $2,400 d. $1,600
ANS: A DIF: 3 OBJ: 03
Depreciation Expense and Accumulated Depreciation are classified, respectively, as a. expense, contra asset b. asset, contra liability c. revenue, asset
d. contra asset, expense
ANS: A DIF: 2 OBJ: 03
The type of account and normal balance of Accumulated Depreciation is a. asset, credit b. asset, debit
c. contra asset, credit d. contra asset, debit
ANS: C DIF: 2 OBJ: 03
The type of account and normal balance of Unearned Rent is a. revenue, credit b. expense, debit c. liability, credit d. liability, debit
ANS: C DIF: 2 OBJ: 03
Data for an adjusting entry described as \a. Wages Expense and credit Wages Payable b. Wages Payable and credit Wages Expense
c. Accounts Receivable and credit Wages Expense d. Drawing and credit Wages Payable
ANS: A DIF: 3 OBJ: 03
Supplies are recorded as assets when purchased. Therefore, the credit to supplies in the adjusting entry is for the amount of supplies a. that are in the ending balance b. purchased 74
Chapter 3—The Matching Concept and the Adjusting Process
37.
38.
39.
40.
41.
c. used
d. either used or remaining
ANS: C DIF: 2 OBJ: 03
If there is a balance in the prepaid rent account after adjusting entries are made, it represents a(n)
a. deferral b. accrual c. revenue d. liability
ANS: A DIF: 2 OBJ: 03
If there is a balance in the unearned subscriptions account after adjusting entries are made, it represents a(n) a. deferral b. accrual c. drawing d. revenue
ANS: A DIF: 2 OBJ: 03
The general term employed to indicate an expense that has not been paid and has not yet been recognized in the accounts by a routine entry is a. capital b. deferral c. accrual d. inventory
ANS: C DIF: 2 OBJ: 03
The cost of office supplies to be used in future periods is ordinarily shown on the balance sheet as a(n) a. capital b. asset
c. contra asset d. liability
ANS: B DIF: 2 OBJ: 03
Which of the following is an example of a prepaid expense? a. Supplies
b. Accounts Receivable c. Unearned Subscriptions
75
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