Question 1 A calendar year company plans to pay its December gas bill in January
ID: 2590454 • Letter: Q
Question
Question 1
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 overstated and liabilities are understated
the income statement and the balance sheet are both accurate because the bill won't be paid until January
net income is overstated and liabilities are overstated
net income is understated and liabilities are understated
net income is understated and liabilities are overstated
Question 2
Which of the following is a deferral error?
Failure to calculate and record interest expense owed on a note payable
Failure to book revenue earned but not received as of year end
Failure to adjust Unearned Revenue at year end
Debiting Accounts Payable and crediting Revenue when billing a customer
Question 3
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 understated and net income will be understated
liabilities will be overstated and net income will be understated
liabilities will be overstated 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 overstated
Question 4
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. To correct this error you must:
wait until the end of the 5-month period
debit Rent Revenue for $24,000; credit Unearned Rent for $24,000
debit Unearned Rent for $24,000; credit Rent Revenue 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
Question 5
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 for $1,800; credit Supplies Expense for $1,800
debit Supplies for $600; credit Supplies Expense for $600
not be necessary
debit Supplies Expense for $600; credit Supplies for $600
debit Supplies Expense for $1,800; credit Supplies for $1,800
Question 6
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. To correct this error you must:
debit Rent Revenue for $16,000; credit Unearned Rent for $16,000
debit Rent Revenue for $24,000; credit Unearned Rent for $24,000
debit Unearned Rent for $16,000; credit Rent Revenue for $16,000
wait until the end of the 5-month period
debit Unearned Rent for $24,000; credit Rent Revenue for $24,000
Question 7
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,
liabilities will be understated and net income will be understated
liabilities will be overstated 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
Question 8
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 Accounts Receivable for $6,000; credit Revenue for $6,000
debit cash for $6,000; credit Revenue for $6,000
debit Cash for $6,000; credit Accounts Receivable for $6,000
debit Revenue for $6,000; credit Account Receivable for $6,000
not be necessary because an entry is not required until the cash is received
Question 9
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 Expense for $7,000; credit Salaries Payable for $7,000
debit Salaries Payable for $14,000; credit Salaries Expense for $14,000
debit Salaries Expense for $14,000; credit Salaries Payable 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
Accrual and deferral errors:
affect the income statement only
affect the balance sheet only
affect both the income statement and the balance sheet
can affect different statements; it depends on the type of the error
Question 11
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 no adjusting entry was made. The correcting entry will:
debit an asset account for $200; credit an expense account for $200
debit an expense account for $1,000; credit an asset account for $1,000
debit an expense account for $200; credit an asset account for $200
debit an asset account for $1,000; credit an expense account for $1,000
Not be necessary
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 $200; credit Prepaid Insurance for $200
not be necessary
debit Prepaid Insurance for $1,000; credit Insurance Expense for $1,000
debit Insurance Expense for $1,000; credit Prepaid Insurance for $1,000
debit Prepaid Insurance for $200; credit Insurance Expense for $200
If you fail to accrue revenue,
assets will be understated 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 overstated
the balance sheet will be accurate, but the income statement will be understated
assets will be overstated and net income will be understated
the income statement will be accurate, but the balance sheet will be understated
Question 14
Your company purchased $2,000 of supplies and recorded the amount as an asset. At year end, a physical count shows $700 of supplies on hand. Before closing the books, it is discovered that an adjusting entry was never made. If no correcting entry is made,
the income statement will be accurate, but the balance sheet will be understated
assets will be understated and net income 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 understated
assets will be overstated and net income will be overstated
assets will be understated and net income will be overstated
Question 15
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 $3,750; credit Insurance Expense for $3,750
debit Prepaid Insurance for $1,250; credit Insurance Expense for $1,250
debit Insurance Expense for $1,250; credit Prepaid Insurance for $1,250
debit Insurance Expense for $3,750; credit Prepaid Insurance for $3,750
debit Prepaid Insurance for $5,000; credit Insurance Expense for $5,000
not be necessary because the original adjusting entry was correct
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 Rent Revenue. On December 31, 20X3, you discover the following adjusting entry:
Rent Revenue 32,000
Unearned Rent 32,000
To correct this error you must:
debit Rent Revenue for $8,000; credit Unearned Rent for $8,000
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 $8,000; credit Rent Revenue for $8,000
Question 17
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 accrues $550 interest expense. If you discover the error before the books are closed, what is the correcting entry?
debit Interest Payable for $200; credit Interest Expense for $200
debit Interest Expense for $350; credit Interest Payable for $350
debit Interest Expense for $200; credit Interest Payable for $200
debit Interest Expense for $550; credit Interest Payable for $550
debit Interest Payable for $350; credit Interest Expense for $350
debit Interest Payable for $550; credit Interest Expense for $550
Question 18
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,
assets will be overstated and net income will be understated
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 overstated
assets will be understated and net income will be understated
assets will be understated and net income will be overstated
Question 19
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 overstated
liabilities will be overstated and net income will be overstated
liabilities will be understated and net income will be understated
liabilities will be overstated and net income will be understated
the financial statements will be accurate because an adjusting entry was not necessary
Question 20
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,
assets will be understated and net income will be overstated
assets will be overstated and net income will be overstated
assets will be overstated and net income will be understated
the financial statements will be accurate because no adjusting entry was necessary
assets will be understated and net income will be understated
the balance sheet is accurate, but the income statement is understated
net income is overstated and liabilities are understated
the income statement and the balance sheet are both accurate because the bill won't be paid until January
net income is overstated and liabilities are overstated
net income is understated and liabilities are understated
net income is understated and liabilities are overstated
Question 2
Which of the following is a deferral error?
Failure to calculate and record interest expense owed on a note payable
Failure to book revenue earned but not received as of year end
Failure to adjust Unearned Revenue at year end
Debiting Accounts Payable and crediting Revenue when billing a customer
Question 3
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 understated and net income will be understated
liabilities will be overstated and net income will be understated
liabilities will be overstated 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 overstated
Question 4
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. To correct this error you must:
wait until the end of the 5-month period
debit Rent Revenue for $24,000; credit Unearned Rent for $24,000
debit Unearned Rent for $24,000; credit Rent Revenue 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
Question 5
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 for $1,800; credit Supplies Expense for $1,800
debit Supplies for $600; credit Supplies Expense for $600
not be necessary
debit Supplies Expense for $600; credit Supplies for $600
debit Supplies Expense for $1,800; credit Supplies for $1,800
Question 6
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. To correct this error you must:
debit Rent Revenue for $16,000; credit Unearned Rent for $16,000
debit Rent Revenue for $24,000; credit Unearned Rent for $24,000
debit Unearned Rent for $16,000; credit Rent Revenue for $16,000
wait until the end of the 5-month period
debit Unearned Rent for $24,000; credit Rent Revenue for $24,000
Question 7
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,
liabilities will be understated and net income will be understated
liabilities will be overstated 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
Question 8
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 Accounts Receivable for $6,000; credit Revenue for $6,000
debit cash for $6,000; credit Revenue for $6,000
debit Cash for $6,000; credit Accounts Receivable for $6,000
debit Revenue for $6,000; credit Account Receivable for $6,000
not be necessary because an entry is not required until the cash is received
Question 9
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 Expense for $7,000; credit Salaries Payable for $7,000
debit Salaries Payable for $14,000; credit Salaries Expense for $14,000
debit Salaries Expense for $14,000; credit Salaries Payable 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
Accrual and deferral errors:
affect the income statement only
affect the balance sheet only
affect both the income statement and the balance sheet
can affect different statements; it depends on the type of the error
Question 11
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 no adjusting entry was made. The correcting entry will:
debit an asset account for $200; credit an expense account for $200
debit an expense account for $1,000; credit an asset account for $1,000
debit an expense account for $200; credit an asset account for $200
debit an asset account for $1,000; credit an expense account for $1,000
Not be necessary
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 $200; credit Prepaid Insurance for $200
not be necessary
debit Prepaid Insurance for $1,000; credit Insurance Expense for $1,000
debit Insurance Expense for $1,000; credit Prepaid Insurance for $1,000
debit Prepaid Insurance for $200; credit Insurance Expense for $200
If you fail to accrue revenue,
assets will be understated 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 overstated
the balance sheet will be accurate, but the income statement will be understated
assets will be overstated and net income will be understated
the income statement will be accurate, but the balance sheet will be understated
Question 14
Your company purchased $2,000 of supplies and recorded the amount as an asset. At year end, a physical count shows $700 of supplies on hand. Before closing the books, it is discovered that an adjusting entry was never made. If no correcting entry is made,
the income statement will be accurate, but the balance sheet will be understated
assets will be understated and net income 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 understated
assets will be overstated and net income will be overstated
assets will be understated and net income will be overstated
Question 15
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 $3,750; credit Insurance Expense for $3,750
debit Prepaid Insurance for $1,250; credit Insurance Expense for $1,250
debit Insurance Expense for $1,250; credit Prepaid Insurance for $1,250
debit Insurance Expense for $3,750; credit Prepaid Insurance for $3,750
debit Prepaid Insurance for $5,000; credit Insurance Expense for $5,000
not be necessary because the original adjusting entry was correct
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 Rent Revenue. On December 31, 20X3, you discover the following adjusting entry:
Rent Revenue 32,000
Unearned Rent 32,000
To correct this error you must:
debit Rent Revenue for $8,000; credit Unearned Rent for $8,000
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 $8,000; credit Rent Revenue for $8,000
Question 17
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 accrues $550 interest expense. If you discover the error before the books are closed, what is the correcting entry?
debit Interest Payable for $200; credit Interest Expense for $200
debit Interest Expense for $350; credit Interest Payable for $350
debit Interest Expense for $200; credit Interest Payable for $200
debit Interest Expense for $550; credit Interest Payable for $550
debit Interest Payable for $350; credit Interest Expense for $350
debit Interest Payable for $550; credit Interest Expense for $550
Question 18
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,
assets will be overstated and net income will be understated
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 overstated
assets will be understated and net income will be understated
assets will be understated and net income will be overstated
Question 19
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 overstated
liabilities will be overstated and net income will be overstated
liabilities will be understated and net income will be understated
liabilities will be overstated and net income will be understated
the financial statements will be accurate because an adjusting entry was not necessary
Question 20
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,
assets will be understated and net income will be overstated
assets will be overstated and net income will be overstated
assets will be overstated and net income will be understated
the financial statements will be accurate because no adjusting entry was necessary
assets will be understated and net income will be understated
Explanation / Answer
1. Answer: net income is overstated and liabilities are understated.
The expense is required to be accrued in December by debiting expense account and crediting liability account. Since this has not been done, expense is understated and therefore net income is overstated. As the liability is not recorded, liabilities are understated.
2. Answer: Failure to adjust Unearned Revenue at year end.
Deferral pertains to splitting an income or expense that has been recorded over more than one accounting periods. Failure to adjust unearned revenue at year end is thus a deferral error.
3. Answer: Liabilities will be understated and net income will be overstated.
Due to the adjusting entry not being made, the payroll expense is understated as a result of which the net income is overstated. Since the liability has not been recorded by way of adjusting entry, the liabilities will be understated.
4. Answer: Debit Rent Revenue for $24,000; credit Unearned Rent for $24,000
The monthly rent will be $40,000 / 5 months = $8,000. Rent revenue must be recognized for 2 months November and December $16,000 (2 x $8,000) while for 3 months from January to March it will be unearned rent revenue of $24,000 (3 x $8,000). Since entire amount is credited to rent revenue, $24,000 must be debited and transferred to unearned rent.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.