As we compare a merchandise business to a service business, the financial statement that changes the

most is the Balance Sheet.

false

Retailers record all credit card sales as charge sales.

false

The seller may prepay the transportation costs even though the terms are FOB shipping point.

true

The buyer will include the sales tax as part of the cost of merchandise purchased.

true

If the buyer bears the transportation costs related to a purchase, the terms are said to be FOB
destination.

false

The chart of accounts for a merchandise business would include an account called Delivery Expense.

true

Service businesses provide services for income, while a merchandising business sells merchandise.

true

Supplies are recorded as assets when purchased. Therefore, the credit to Supplies in the adjusting entry
is for the amount of supplies

used

A business pays biweekly salaries of $20,000 every other Friday for a 10-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

credit to Salaries Payable of $16,000

Accrued revenues would affect _______ on the balance sheet.

assets

The adjusting entry to adjust supplies was omitted at the end of the year. This would affect the income
statement by having

expenses understated and therefore net income overstated

The entry to adjust for the cost of supplies used during the accounting period is

debit Supplies Expense; credit Supplies

Buster Industries pays weekly salaries of $30,000 on Friday for a five-day week ending on that day. The
adjusting entry necessary at the end of the fiscal period ending on Tuesday is

debit Salary Expense, $12,000; credit Salaries Payable, $12,000

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

Depreciation Expense

Accumulated Depreciation and Depreciation Expense are classified, respectively, as

contra asset, expense

Which of the following pairs of accounts could not appear in the same adjusting entry?

Interest Income and Interest Expense

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

Wages Expense

4,500

Wages Payable

4,500

????????????????

Record wages expense incurred and to be paid next month.

Which of the following is considered to be unearned revenue?

theater tickets sold for next month's performance

By matching revenue earned during the accounting period to related incurred expenses,

net income or loss will be properly reported on the income statement

When is the adjusted trial balance prepared?

after adjusting journal entries are posted

Which of the following accounting steps in the accounting process would be completed last?

preparing the financial statements

At the end of the fiscal year, the usual adjusting entry to prepaid insurance to record expired insurance
was omitted. Which of the following statements is true?

Net income for the year will be overstated

Accrued expenses affect ________ on the balance sheet.

liabilities

Which of the following is the proper adjusting entry, based on a prepaid insurance account balance
before adjustment of $14,000 and unexpired insurance of $3,000, for the fiscal year ending on April 30?

debit Insurance Expense, $11,000; credit Prepaid Insurance, $11,000

Which of the following is an example of a prepaid expense?

Supplies

The unearned rent account has a balance of $72,000. If $18,000 of the $72,000 is unearned at the end of
the accounting period, the amount of the adjusting entry is

$54,000

The balance in the supplies account before adjustment at the end of the year is $6,250. The proper
adjusting entry if the amount of supplies on hand at the end of the year is $1,500 would be

debit Supplies Expense, $4,750; credit Supplies, $4,750

For the year ending December 31, Orion, Inc. mistakenly omitted adjusting entries for $1,500 of supplies
that were used, (2) unearned revenue of $4,200 that was earned, and (3) insurance of $5,000 that
expired. For the year ending December 31, what is the effect of these errors on revenues, expenses, and
net income?

Net income is overstated by $2,300.

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

book value

What effect will this adjustment have on the accounting records?

Unearned Fees

6,375

Fees Earned

6,375

decrease liabilities

Correct!

All of these choices

increase net income

increase revenues reported for the period

Which of the following accounts would likely be included in an accrual adjusting entry?

Interest Expense

If there is a balance in the prepaid rent account after adjusting entries are made, it represents a(n)

deferral

Which of the following is not true about closing entries?

All real accounts are closed at the end of the period.

Which one of the steps below is not aided by the preparation of the end-of-period spreadsheet?

posting to the general ledger

Prepaid insurance is reported on the balance sheet as a

current asset

The first item appearing on the statement of owner's equity is

the beginning balance of owner's equity

The difference between the totals of the Debit and Credit columns of the Adjusted Trial Balance columns
on the end-of-period spreadsheet

indicates there is an error on the work sheet

After all of the account balances have been extended to the Balance Sheet columns of the work sheet,
the totals of the Debit and Credit columns are $36,755 and $32,735, respectively. What is the amount of
net income or net loss for the period?

$4,020 of net income

Evan Roberts owns a business, Shores Sports, that rents canoes and kayaks. Below is the adjusted trial
balance at December 31.

Account

No.
Debit

Balances

Credit

Balances

Cash 11 1,500

Accounts Receivable 12 2,000

Interest Receivable 13 100

Prepaid Insurance 14 1,600

Notes Receivable (long-term) 16 2,800

Equipment 18 15,000

Accumulated Depreciation 19 3,000

Accounts Payable 21 2,400

Accrued Expenses Payable 22 3,920

Income Taxes Payable 23 2,700

Unearned Rent Fees 25 500

Evan Roberts, Capital 31 7,700

Evan Roberts, Drawing 32 2,000

Rent Fees Earned 41 37,000

Furniture Rental Revenue 42 1,200

Interest Revenue 43 100

Wages Expense 51 19,000

Depreciation Expense 52 1,800

Utilities Expense 53 320

Insurance Expense 54 700

Maintenance Expense 55 9,000

Income Tax Expense 56 2,700

58,520 58,520

The entry required to close the revenue and expense accounts at the end of the period includes a

credit for $38,300

The income statement should be prepared

before the statement of owner's equity and balance sheet

Which of the following account groups includes nominal accounts?

Rent Revenue, Fees Earned, Miscellaneous Expense

On September 1, the company pays rent for 12 months in advance and debits an asset account. At year-
end, the adjusting entry on the work sheet would

increase an expense account

Use the adjusted trial balance for Stockton Company to answer the questions that follow.

Stockton Company
Adjusted Trial Balance

December 31

Account

No.

Debit

Balances

Credit

Balances

Cash 11

6,530

Accounts Receivable 12

2,100
Prepaid Expenses 13

700

Equipment 18

13,700

Accumulated Depreciation 19

1,100

Accounts Payable 21

1,900

Notes Payable 22

4,300

Bob Steely, Capital 31

12,940

Bob Steely, Drawing 32

790
Fees Earned 41

9,250

Wages Expense 51

2,500

Rent Expense 52

1,960

Utilities Expense 53

775

Depreciation Expense 54

250

Miscellaneous Expense 59

185

Totals
29,490

29,490

Use the adjusted trial balance for Stockton Company. Determine the net income (loss) for the period.

Net income is $3,580.

The statement of owner's equity should be prepared

after the income statement and before the balance sheet

When the end-of-period spreadsheet is complete, the Adjustments columns should have

total debits equal to total credits

What is the major difference between the unadjusted trial balance and the adjusted trial balance?

The adjusted trial balance includes the postings of the adjustments for the period in the balance of the
accounts.

Evan Roberts owns a business, Shore Sports, that rents canoes and kayaks. Below is the adjusted trial
balance at December 31.
Account

No.

Debit

Balances

Credit

Balances

Cash 11 1,500

Accounts Receivable 12 2,000

Interest Receivable 13 100

Prepaid Insurance 14 1,600

Notes Receivable (long-term) 16 2,800

Equipment 18 15,000

Accumulated Depreciation 19 3,000

Accounts Payable 21 2,400

Accrued Expenses Payable 22 3,920

Income Taxes Payable 23 2,700

Unearned Rent Fees 25 500

Evan Roberts, Capital 31 7,700

Evan Roberts, Drawing 32 2,000

Rent Fees Earned 41 37,000

Furniture Rental Revenue 42 1,200

Interest Revenue 43 100

Wages Expense 51 19,000

Depreciation Expense 52 1,800

Utilities Expense 53 320

Insurance Expense 54 700

Maintenance Expense 55 9,000

Income Tax Expense 56 2,700

Totals 58,520 58,520

The entry required to close the expense accounts at the end of the period will

increase Owner's Capital by $33,520

Which of the following does not appear on the end-of-period spreadsheet?

closing entries

closing entries

is used to summarize account balances and adjustments for the financial statements

Unearned fees appear on the

balance sheet as a current liability

The Income Statement columns in the end-of-period spreadsheet show that debits are equal to $55,800
and credits are $77,520. What does this information mean to the accountant?

There is a net income of $21,720.

Which of the following accounts would appear in the Balance Sheet columns of the end-of-period
spreadsheet?

Prepaid Insurance

Diane's Designs purchased a one-year liability insurance policy on March 1 of a year for $8,400 and
recorded it as a prepaid expense. Which of the following amounts would be recorded as insurance
expense during the adjusting process at the end of Diane's first month of operations on March 31?

$700

An indication that the end-of-period spreadsheet columns are in balance and the spreadsheet is
complete is

the double rule under each pair of columns

When preparing the statement of owner's equity, the beginning capital balance can always be found

in the general ledger

Which of the following statements indicates that a company earned a net income for the period?

The sum of the credits exceeds the sum of the debits in the Income Statement columns on the end-of-
period spreadsheet.

The post-closing trial balance differs from the adjusted trial balance in that it does not

include income statement accounts