Reference no: EM132319239

Answer the following Questions:

QUESTION 1

On March 31, 20X8, your calendar year company takes out a 3-year insurance policy with a premium of $4,000 per year. The entire $12,000 is paid in advance and is recorded as prepaid insurance. At year-end 20X8, you discover that the adjusting entry debits Insurance Expense for $4,000 and credits Prepaid Insurance for $4,000. If you do not correct this,

everything will be fine. Since the original adjusting entry was correct, no correction needs to be made.

assets will be overstated and net income will be understated

assets will be overstated and net income will be overstated

assets will be understated and net income will be understated

assets will be understated and net income will be overstated

QUESTION 2

On March 1, 20X1, your calendar year company borrows $10,000. Terms require repayment of principal and annual interest of 9% after 4 years. At year-end 20X1, an adjusting entry was made that accrued $550 interest expense. If you discover the error before the books are closed, what correcting entry needs to be made?

debit Interest Payable for $200; credit Interest Expense for $200

debit Interest Expense for $350; credit Interest Payable for $350

debit Interest Payable for $550; credit Interest Expense for $550

debit Interest Expense for $550; credit Interest Payable for $550

debit Interest Payable for $350; credit Interest Expense for $350

debit Interest Expense for $200; credit Interest Payable for $200

QUESTION 3

On November 1, 20X3, your calendar year company receives $40,000 for space it is subletting for 5 months (November 1, 20X3 through March 31, 20X4). The $40,000 was recorded as revenue. On December 31, 20X3, you discover that an adjusting entry was never made. If you fail to make the correcting entry,

the financial statements will be accurate because an adjusting entry was not necessary

liabilities will be overstated and net income will be overstated

liabilities will be understated and net income will be overstated

liabilities will be overstated and net income will be understated

liabilities will be understated and net income will be understated

QUESTION 4

On March 31, 20X8, your calendar year company takes out a 3-year insurance policy with a premium of $5,000 per year. The entire $15,000 is paid in advance on March 31, 20X8 and is recorded as prepaid insurance. On December 31, 20X8, you discover that the adjusting entry debited Insurance Expense for $5,000 and credited Prepaid Insurance for $5,000. Your correcting journal entry will:

debit Prepaid Insurance for $5,000; credit Insurance Expense for $5,000

debit Insurance Expense for $3,750; credit Prepaid Insurance for $3,750

debit Prepaid Insurance for $3,750; credit Insurance Expense for $3,750

not be necessary because the original adjusting entry was correct

debit Insurance Expense for $1,250; credit Prepaid Insurance for $1,250

debit Prepaid Insurance for $1,250; credit Insurance Expense for $1,250

QUESTION 5

If you fail to accrue revenue,

assets will be understated and net income will be overstated

assets will be understated and net income will be understated

the income statement will be accurate, but the balance sheet will be understated

the balance sheet will be accurate, but the income statement will be understated

assets will be overstated and net income will be overstated

assets will be overstated and net income will be understated

QUESTION 6

Your calendar year company completes a $6,000 job, which has not been recorded or received. If you discover before the books are closed that no adjusting entry was made, your correcting entry will:

debit Cash for $6,000; credit Accounts Receivable for $6,000

debit cash for $6,000; credit Revenue for $6,000

debit Accounts Receivable for $6,000; credit Revenue for $6,000

not be necessary because an entry is not required until the cash is received

debit Revenue for $6,000; credit Account Receivable for $6,000

QUESTION 7

On September 1, 20X8, your calendar year company pays $2,400 for 12 months' insurance, recording the amount as an expense. Just  before closing the books, you realize that no adjusting entry was recorded. Without it,  the financial statements will be accurate because no adjusting entry was necessary

assets will be overstated and net income will be overstated

assets will be understated and net income will be overstated

assets will be overstated and net income will be understated

assets will be understated and net income will be understated

QUESTION 8

Your company purchases $3,000 of supplies, recording them as expenses. At year end, a physical count shows $1,800 of supplies on hand. The year-end adjusting entry debits Supplies for $1,200 and credits Supplies Expense for $1,200. The correcting entry will:

debit Supplies Expense for $1,800; credit Supplies for $1,800

debit Supplies for $1,800; credit Supplies Expense for $1,800

debit Supplies for $600; credit Supplies Expense for $600

debit Supplies Expense for $600; credit Supplies for $600

not be necessary because the adjusting entry was done correctly

QUESTION 9

On November 1, 20X3, your calendar year company receives $40,000 for space it is subletting for 5 months (November 1, 20X3 through March 31, 20X4). The $40,000 was recorded as revenue. On December 31, 20X3, you discover that an adjusting entry was never made. The correcting entry will:

not be necessary

debit Rent Revenue for $24,000; credit Unearned Rent for $24,000

debit Rent Revenue for $16,000; credit Unearned Rent for $16,000

debit Unearned Rent for $16,000; credit Rent Revenue for $16,000

debit Unearned Rent for $24,000; credit Rent Revenue for $24,000

QUESTION 10

On November 1, 20X3, your calendar year company receives $40,000 for space it is subletting for 5 months (November 1, 20X3 through March 31, 20X4). The $40,000 was recorded as a liability. On December 31, 20X3, you discover that an adjusting entry was never made. If you fail to make the correcting entry,

liabilities will be understated and net income will be understated

the financial statements will be accurate because an adjusting entry was not necessary

liabilities will be overstated and net income will be overstated

liabilities will be understated and net income will be overstated

liabilities will be overstated and net income will be understated

QUESTION 11

Your employer has a Monday-Friday workweek; the 5-day payroll totals $35,000 each week. In 20X2, December 31 is a Tuesday. One of your assistants made the adjusting entry by debiting Salaries Expense and crediting Salaries Payable for $21,000. Your correcting entry will:
debit Salaries Payable for $14,000; credit Salaries Expense for $14,000

not be necessary because the original adjusting entry was done correctly

debit Salaries Payable for $7,000; credit Salaries Expense for $7,000

debit Salaries Expense for $7,000; credit Salaries Payable for $7,000

debit Salaries Expense for $14,000; credit Salaries Payable for $14,000

QUESTION 12

On November 1, 20X8, your calendar year company pays $1,200 for 12 months' insurance, recording it as an expense. Just before closing the books, you realize that no adjusting entry was made. The correcting entry will:

debit Insurance Expense for $1,000; credit Prepaid Insurance for $1,000

debit Insurance Expense for $200; credit Prepaid Insurance for $200

debit Prepaid Insurance for $200; credit Insurance Expense for $200

debit Prepaid Insurance for $1,000; credit Insurance Expense for $1,000

not be necessary

QUESTION 13

Accrual and deferral errors:

affect both the income statement and the balance sheet

can affect different statements; it depends on the type of the error

affect the income statement only

affect the balance sheet only

QUESTION 14

A calendar year company plans to pay its December gas bill in January. As of December 31, no adjusting entry has been recorded. As a result,

the balance sheet is accurate, but the income statement is understated

net income is understated and liabilities are understated

net income is overstated and liabilities are understated

net income is understated and liabilities are overstated

net income is overstated and liabilities are overstated

the income statement and the balance sheet are both accurate because the bill won't be paid until January

QUESTION 15

On November 1, 20X3, your calendar year company receives $40,000 for space it is subletting for 5 months (November 1, 20X3 through March 31, 20X4). The $40,000 was recorded as Rent Revenue. On December 31, 20X3, you discover the following adjusting entry:

Rent Revenue 24,000

Unearned Rent 24,000

To correct this error you must:

do nothing; the adjusting entry is correct

debit Unearned Rent for $8,000; credit Rent Revenue for $8,000

debit Unearned Rent for $16,000; credit Rent Revenue for $16,000

debit Rent Revenue for $16,000; credit Unearned Rent for $16,000

debit Rent Revenue for $8,000; credit Unearned Rent for $8,000

QUESTION 16

On November 1, 20X3, your calendar year company receives $40,000 for space it is subletting for 5 months (November 1, 20X3 through March 31, 20X4). The $40,000 was recorded as a liability. On December 31, 20X3, you discover that an adjusting entry was never made. The correcting entry will:

debit Rent Revenue for $24,000; credit Unearned Rent for $24,000

debit Unearned Rent for $16,000; credit Rent Revenue for $16,000

not be necessary

debit Unearned Rent for $24,000; credit Rent Revenue for $24,000

debit Rent Revenue for $16,000; credit Unearned Rent for $16,000

QUESTION 17

Your employer has a Monday-Friday workweek; the 5-day payroll totals $20,000 each week. In 20X1, December 31 is a Thursday. Just before closing the books, you realize that no adjusting entry was made. If no correcting entry is recorded,

liabilities will be overstated and net income will be understated

liabilities will be understated and net income will be overstated

everything will be fine. The original adjusting entry was unnecessary and no correction needs to be made

liabilities will be understated and net income will be understated

liabilities will be overstated and net income will be overstated

QUESTION 18

Which of the following is a deferral error?

Debiting Accounts Payable and crediting Revenue when billing a customer

Failure to book revenue earned but not received as of year end

Failure to adjust Unearned Revenue at year end

Failure to calculate and record interest expense owed on a note payable

QUESTION 19

On November 1, 20X8, your calendar year company pays $1,200 for 12 months' insurance, recording it as an asset. Just before closing the books, you realize that noadjusting entry was made. The correcting entry will:

debit an asset account for $1,000; credit an expense account for $1,000

debit an expense account for $200; credit an asset account for $200

Not be necessary

debit an expense account for $1,000; credit an asset account for $1,000

debit an asset account for $200; credit an expense account for $200