Appropriate adjusting journal entry

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Reference no: EM13754803

1. A company purchased office supplies costing $3,000 and debited Office Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $600 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be:

debit Office Supplies Expense, $3,600; credit Office Supplies, $3,600.
debit Office Supplies, $600; credit Office Supplies Expense, $600.
debit Office Supplies Expense, $2,400; credit Office Supplies, $2,400.
debit Office Supplies, $2,400; credit Office Supplies Expense, $2,400.

2. If total liabilities decreased by $4,000, then

stockholders' equity must have decreased by $4,000.
assets must have decreased by $4,000, or stockholders' equity must have increased by $4,000.
assets and stockholders' equity each increased by $2,000.
assets must have increased by $4,000.

3. The Vintage Laundry Company purchased $6,500 worth of laundry supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the laundry supplies indicated only $2,000 on hand. The adjusting entry that should be made by the company on June 30 is:

debit Laundry Supplies Expense, $2,000; credit Laundry Supplies, $2,000.
debit Laundry Supplies, $4,500; credit Laundry Supplies Expense, $4,500.
debit Laundry Supplies, $2,000; credit Laundry Supplies Expense, $2,000.
debit Laundry Supplies Expense, $4,500; credit Laundry Supplies, $4,500.

4. If a company fails to adjust a Prepaid Rent account for rent that has expired, what effect will this have on that month's financial statements?

Failure to make an adjustment does not affect the financial statements.
Expenses will be overstated and net income and stockholders' equity will be under- stated.
Assets will be overstated and net income and stockholders' equity will be understated.
Assets will be overstated and net income and stockholders' equity will be overstated.

5. Which of the following accounts has a normal credit balance?

Prepaid Rent
Notes Receivable
Rent Revenue
Rent Expense

6. On October 1, 2012, Metz Industries had an Accounts Payable balance of $60,000. During the month, the company made purchases on account of $50,000 and made payments on account of $80,000. At October 31, 2012, the Accounts Payable balance is

$60,000 debit
$20,000 credit
$30,000 credit
$80,000 credit

7. Adjusting entries are:

not necessary if the accounting system is operating properly.
usually required before financial statements are prepared.
made whenever management desires to change an account balance.
made to balance sheet accounts only.

8. When a company receives a utility bill but will not pay it right away, it should

debit Utilities Expense and credit Accounts Receivable.
debit Utilities Expense and credit Accounts Payable.
debit Accounts Payable and credit Utilities Expense.
make no entry until the bill is paid.

9. For the basic accounting equation to stay in balance, each transaction recorded must

affect two or less accounts.
affect two or more accounts.
always affect exactly two accounts.
affect the same number of asset and liability accounts.

10. On March 1, 2012, Freeze Company hires a new employee who will start to work on March 6. The employee will be paid on the last day of each month. Should a journal entry be made on March 6? Why or why not?

Yes, the company is now obligated to pay the employee, thus that event must be recorded.
No, hiring an employee is an important event; however, it is not an economic event that should be recorded.
Yes, failure to record the event would cause the financial statements to be misleading.
No, the financial position of the company has been changed; however, the dollar amount of the transaction is not yet known.

Reference no: EM13754803

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