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Question(s) / Instruction(s):

99. Kim Roberts has performed $500 of CPA services for a client but has not billed the client as of the end of the accounting period. What adjusting entry must Kim make? a. Debit Cash and credit Unearned Revenue b. Debit Accounts Receivable and credit Unearned Revenue c. Debit Accounts Receivable and credit Service Revenue d. Debit Unearned Revenue and credit Service Revenue

100. Kim Roberts, CPA, has billed her clients for services performed. She subsequently receives payments from her clients. What entry will she make upon receipt of the payments? a. Debit Unearned Revenue and credit Service Revenue b. Debit Cash and credit Accounts Receivable c. Debit Accounts Receivable and credit Service Revenue d. Debit Cash and credit Service Revenue

101. Clark Real Estate signed a four-month note payable in the amount of $10,000 on September 1. The note requires interest at an annual rate of 12%. The amount of interest to be accrued at the end of September is a. $400. b. $100. c. $1,200. d. $300.

102. A gift shop signs a three-month note payable to help finance increases in inventory for the Christmas shopping season. The note is signed on November 1 in the amount of $30,000 with annual interest of 12%. What is the adjusting entry to be made on December 31 for the interest expense accrued to that date, if no entries have been made previously for the interest? 102. (cont.) a. Interest Expense 600 Interest Payable 600 b. Interest Expense 900 Interest Payable 900 c. Interest Expense 600 Cash 600 d. Interest Expense 600 Note Payable 600

103. Trent Tables paid employee wages on and through Friday, January 26, and the next payroll will be paid in February. There are three more working days in January (29–31). Employees work 5 days a week and the company pays $1,000 a day in wages. What will be the adjusting entry to accrue wages expense at the end of January? a. Wages Expense 1,000 Wages Payable 1,000 b. Wages Expense 5,000 Wages Payable 5,000 c. Wages Expense 3,000 Wages Payable 3,000 d. No adjusting entry is required.

104. A company shows a balance in Salaries Payable of $25,000 at the end of the month. The next payroll amounting to $40,000 is to be paid in the following month. What will be the journal entry to record the payment of salaries? a. Salaries Expense 40,000 Salaries Payable 40,000 b. Salaries Expense 40,000 Cash 40,000 c. Salaries Expense 15,000 Cash 15,000 d. Salaries Expense 15,000 Salaries Payable 25,000 Cash 40,000 105. The accounts of a business before an adjusting entry is made to record an accrued revenue reflect an a. understated liability and an overstated owner's capital. b. overstated asset and an understated revenue. c. understated expense and an overstated revenue. d. understated asset and an understated revenue.

106. Carter Guitar Company borrowed $40,000 from the bank signing a 9%, 3-month note on September 1. Principal and interest are payable to the bank on December 1. If the company prepares monthly financial statements, the adjusting entry that the company should make for interest on September 30, would be a. Debit Interest Expense, $3,600; Credit Interest Payable, $3,600. b. Debit Interest Expense, $300; Credit Interest Payable, $300. c. Debit Note Payable, $3,600; Credit Cash, $3,600. d. Debit Cash, $900; Credit Interest Payable, $900.

107. An adjusted trial balance a. is prepared after the financial statements are completed. b. proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made. c. is a required financial statement under generally accepted accounting principles. d. cannot be used to prepare financial statements.

108. Which of the statements below is not true? a. An adjusted trial balance should show ledger account balances. b. An adjusted trial balance can be used to prepare financial statements. c. An adjusted trial balance proves the mathematical equality of debits and credits in the ledger. d. An adjusted trial balance is prepared before all transactions have been journalized.

a 109. Ben is a barber who does his own accounting for his shop. When he buys supplies he routinely debits Supplies Expense. Ben purchased $1,500 of supplies in January and his inventory at the end of January shows $200 of supplies remaining. What adjusting entry should Ben make on January 31? a. Supplies Expense 200 Supplies 200 b. Supplies Expense 1,500 Cash 1,500 c. Supplies 200 Supplies Expense 200 d. Supplies Expense 1,300 Supplies 1,300

a 110. Ken is a lawyer who requires that his clients pay him in advance of legal services rendered. Ken routinely credits Legal Service Revenue when his clients pay him in advance. In June Ken collected $16,000 in advance fees and completed 75% of the work related to these fees. What adjusting entry is required by Ken's firm at the end of June? a. Unearned Revenue 12,000 Legal Service Revenue 12,000 b. Unearned Revenue 4,000 Legal Service Revenue 4,000 c. Cash 16,000 Legal Service Revenue 16,000 d. Legal Service Revenue 4,000 Unearned Revenue 4,000

a 111. If prepaid expenses are initially recorded in expense accounts and have not all been used at the end of the accounting period, then failure to make an adjusting entry will cause a. assets to be understated. b. assets to be overstated. c. expenses to be understated. d. contra-expenses to be overstated.

a 112. If unearned revenues are initially recorded in revenue accounts and have not all been earned at the end of the accounting period, then failure to make an adjusting entry will cause a. liabilities to be overstated. b. revenues to be understated. c. revenues to be overstated. d. accounts receivable to be overstated. a113. On January 2, 2002, Federal Savings and Loan purchased a general liability insurance policy for $3,600 for coverage for the calendar year. The entire $3,600 was charged to Insurance Expense on January 2, 2002. If the firm prepares monthly financial statements, the proper adjusting entry on January 31, 2002, will be: a. Insurance Expense 3,300 Prepaid Insurance 3,300 b. Prepaid Insurance 3,300 Insurance Expense 3,300 c. Insurance Expense 300 Prepaid Insurance 300 d. Prepaid Insurance 300 Insurance Expense 300

The following questions are from the Study Guide.

s114. Which of the following statements concerning accrual-basis accounting is incorrect? a. Accrual-basis accounting follows the revenue recognition principle. b. Accrual-basis accounting is the method required by generally accepted accounting principles. c. Accrual-basis accounting recognizes expenses when they are paid. d. Accrual-basis accounting follows the matching principle.

s115. For prepaid expense adjusting entries a. an expense-liability account relationship exists. b. prior to adjustment, expenses are overstated and assets are understated. c. the adjusting entry results in a debit to an expense account and a credit to an asset account. d. none of these.

s116. Demaet Cruise Lines purchased a five-year insurance policy for its ships on April 1, 2002 for $100,000. Assuming that April 1 is the effective date of the policy, the adjusting entry on December 31, 2002 is a. Prepaid Insurance 15,000 Insurance Expense 15,000 b. Insurance Expense 15,000 Prepaid Insurance 15,000 c. Insurance Expense 20,000 Prepaid Insurance 20,000 d. Insurance Expense 5,000 Prepaid Insurance 5,000

s 117. Gardner Company purchased a truck from Kutner Co. by issuing a 6-month 10% note payable for $30,000 on November 1. On December 31, the accrued expense adjusting entry is a. No entry is required. b. Interest Expense 3,000 Interest Payable 3,000 c. Interest Expense 6,000 Interest Payable 6,000 d. Interest Expense 500 Interest Payable 500

s 118. Cathy Cline, an employee of the Wheeler Company, will not receive her paycheck until April 2. Based on services performed from March 15 to March 30 her salary was $800. The adjusting entry for Wheeler Company on March 31 is a. Salaries Expense 800 Salaries Payable 800 b. No entry is required. c. Salaries Expense 800 Cash 800 d. Salaries Payable 800 Cash 800

s119. Financial statements are prepared directly from the a. general journal. b. ledger. c. trial balance. d. adjusted trial balance.

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