Adjusting Entries

Matching

Match these type of accounts with the following business transactions.

a. Prepaid expense
b. Accrued expense
c. Unearned revenue
d. Accrued revenue
1. Services provided by an attorney that have not been recorded.
2. Paid for one year’s insurance policy
3. Retainage received by the client for future legal representation.
4. Annual property taxes that are paid at the end of the year
5. Electric bill to be paid next month
6. Paid for a magazine subscription for the next 6 months
7. Received payment for a magazine subscription for the next 6 months
8. Provided tutoring for a student, invoice to be sent at the beginning of the next month to the parent for payment.

Multiple Choice
Identify the choice that best completes the statement or answers the question.

9. The matching concept

a. addresses the relationship between the journal and the balance sheet
b. determines whether the normal balance of an account is a debit or credit
c. requires that the dollar amount of debits equal the dollar amount of credits on a trial
balance
d. determines that expenses related to revenue be reported at the same time the revenue is
reported
10. Using accrual accounting, revenue is recorded and reported only
a. when cash is received without regard to when the services are rendered
b. when the services are rendered without regard to when cash is received
c. when cash is received at the time services are rendered
d. if cash is received after the services are rendered
11. Using accrual accounting, expenses are recorded and reported only
a. when they are incurred, whether or not cash is paid
b. when they are incurred and paid at the same time
c. if they are paid before they are incurred
d. if they are paid after they are incurred
12. One of the accounting concepts upon which deferrals and accruals are based is
a. matching
b. cost
c. price-level adjustment
d. conservatism
13. The primary difference between deferred and accrued expenses is that deferred expenses have
a. been incurred and accrued expenses have not
b. not been incurred and accrued expenses have been incurred
c. been recorded and accrued expenses have not been incurred
 d. not been recorded and accrued expenses have been incurred
14. Prior to the adjusting process, accrued expenses have
a. not yet been incurred, paid, or recorded
b. been incurred, not paid, but have been recorded
c. been incurred, not paid, and not recorded
d. been paid but have not yet been incurred
15. Prior to the adjusting process, accrued revenue has
a. been earned and cash received
b. been earned and not recorded as revenue
c. not been earned but recorded as revenue
d. not been recorded as revenue but cash has been received
16. Deferred expenses have
a. not yet been recorded as expenses or paid
b. been recorded as expenses and paid
c. been incurred and paid
d. not yet been recorded as expenses
17. Deferred revenue is revenue that is
a. earned and the cash has been received
b. earned but the cash has not been received
c. not earned and the cash has not been received
d. not earned but the cash has been received
18. Adjusting entries are
a. the same as correcting entries
b. needed to bring accounts up to date and match revenue and expense
c. optional under generally accepted accounting principles
d. rarely needed in large companies
19. Adjusting entries affect at least one
a. income statement account and one balance sheet account
b. revenue and the drawing account
c. asset and one owner's equity account
d. revenue and one capital account
20. Generally accepted accounting principles requires that companies use the ____ of accounting.
a. cash basis
b. deferral basis
c. accrual basis
d. account basis
21. Which of the following supports the accrual basis of accounting?
a. revenue recognition concept
b. cash concept
c. matching concept
d. revenue recognition and matching concepts
22. Prepaid expenses are eventually expected to
a. become expenses when their future economic value expires.
b. become revenues when services are performed.
c. become expenses in the period when they are paid.
d. become revenues when the liability is no longer owed.
23. Which of the following is considered to be unearned revenue?
a. Concert tickets sold for tonight’s performance.
b. Concert tickets sold yesterday on credit.
 c. Concert tickets that were not sold for the current performance.
d. Concert tickets sold for next month’s performance.
24. Which of the following is an example of accrued revenue?
a. Swimming pool cleaning that has been for three months in advance.
b. Swimming pool cleaning that has been provided but has not been billed or paid.
c. An agreement has been signed for swimming pool cleaning for the next three months.
d. Swimming pool cleaning that has been provided and paid on the same day.
25. Which of the following is considered to be an accrued expense?
a. A computer technician has installed the latest software updates and was paid on the same
day.
b. A computer technician has been paid in advance to install software updates as they
become available.
c. A computer technician has just signed an agreement with you regarding pricing for future
work.
d. A computer technician has installed the latest software updates, but you have not received
their invoice for payment.
26. The balance in the prepaid rent account before adjustment at the end of the year is $15,000, which represents three
months' rent paid on December 1. The adjusting entry required on December 31 is
a. debit Rent Expense, $5,000; credit Prepaid Rent, $5,000
b. debit Prepaid Rent, $10,000; credit Rent Expense, $5,000
c. debit Rent Expense, $10,000; credit Prepaid Rent, $5,000
d. debit Prepaid Rent, $5,000; credit Rent Expense, $5,000
27. The balance in the office supplies account on June 1 was $5,200, supplies purchased during June were $2,500, and
the supplies on hand at June 30 were $2,000. The amount to be used for the appropriate adjusting entry is
a. $4,500
b. $2,500
c. $9,700
d. $5,700
28. What is the proper adjusting entry at June 30, the end of the fiscal year, based on a prepaid insurance account
balance before adjustment, $15,500, and unexpired amounts per analysis of policies, $4,500?
a. debit Insurance Expense, $4,500; credit Prepaid Insurance, $4,500
b. debit Insurance Expense, $15,500; credit Prepaid Insurance, $15,500
c. debit Prepaid Insurance, $11,500; credit Insurance Expense, $11,500
d. debit Insurance Expense, $11,000; credit Prepaid Insurance, $11,000
29. The entry to adjust for the cost of supplies used during the accounting period is
a. Supplies Expense, debit; Supplies, credit
b. James Smith, Capital, debit; Supplies, credit
c. Accounts Payable, debit; Supplies, credit
d. Supplies, debit; credit James Smith, Capital
30. A business pays weekly salaries of $20,000 on Friday for a five-day week ending on that day. The adjusting entry
necessary at the end of the fiscal period ending on Thursday is
a. debit Salaries Payable, $16,000; credit Cash, $16,000
b. debit Salary Expense, $16,000; credit Drawing, $16,000
c. debit Salary Expense, $16,000; credit Salaries Payable, $16,000
d. debit Drawing, $16,000; credit Cash, $16,000
31. The adjusting entry to record the depreciation of equipment for the fiscal period is
a. debit Depreciation Expense; credit Equipment
b. debit Depreciation Expense; credit Accumulated Depreciation
c. debit Accumulated Depreciation; credit Depreciation Expense
 d. debit Equipment; credit Depreciation Expense
32. As time passes, fixed assets other than land lose their capacity to provide useful services. To account for this
decrease in usefulness, the cost of fixed assets is systematically allocated to expense through a process called
a. equipment allocation
b. depreciation
c. accumulation
d. matching
33. The entry to adjust the accounts for wages accrued at the end of the accounting period is
a. Wages Payable, debit; Wages Income, credit
b. Wages Income, debit; Wages Payable, credit
c. Wages Payable, debit; Wages Expense, credit
d. Wages Expense, debit; Wages Payable, credit
34. The supplies account has a balance of $1,000 at the beginning of the year and was debited during the year for
$2,800, representing the total of supplies purchased during the year. If $750 of supplies are on hand at the end of
the year, the supplies expense to be reported on the income statement for the year is
a. $750
b. $3,550
c. $3,800
d. $3,050
35. A company purchases a one-year insurance policy on June 1 for $840. The adjusting entry on December 31 is
a. debit Insurance Expense, $350 and credit Prepaid Insurance, $350
b. debit Insurance Expense, $280 and credit Prepaid Insurance, $280
c. debit Insurance Expense, $490, and credit Prepaid Insurance, $ 490.
d. debit Prepaid Insurance, $720, and credit Cash, $720
36. If the prepaid rent account before adjustment at the end of the month has a debit balance of $1,600, representing a
payment made on the first day of the month, and if the monthly rent was $800, the amount of prepaid rent that
would appear on the balance sheet at the end of the month, after adjustment, is
a. $800
b. $400
c. $2,400
d. $1,600
37. Data for an adjusting entry described as "accrued wages, $2,020" means to debit
a. Wages Expense and credit Wages Payable
b. Wages Payable and credit Wages Expense
c. Accounts Receivable and credit Wages Expense
d. Drawing and credit Wages Payable
38. Supplies are recorded as assets when purchased. Therefore, the credit to supplies in the adjusting entry is for the
amount of supplies
a. that are in the ending balance
b. purchased
c. used
d. either used or remaining
39. The cost of office supplies to be used in future periods is ordinarily shown on the balance sheet as a(n)
a. capital
b. asset
c. contra asset
d. liability
40. The unexpired insurance at the end of the fiscal period represents
a. an accrued asset
 b. an accrued liability
c. an accrued expense
d. a deferred expense
41. Accrued revenues would appear on the balance sheet as
a. assets
b. liabilities
c. capital
d. prepaid expenses
42. Unearned rent, representing rent for the next six months' occupancy, would be reported on the landlord's balance
sheet as a(n)
a. asset
b. liability
c. capital account
d. revenue
43. Accrued expenses are ordinarily reported on the balance sheet as
a. assets
b. liabilities
c. fixed assets
d. prepaid expenses
44. The general term employed to indicate a delay of the recognition of an expense already paid or of a revenue
already received is
a. depreciation
b. deferral
c. accrual
d. inventory
45. The adjusting entry for rent earned that is currently recorded in the unearned rent account is
a. Unearned Rent, debit; Rent Revenue, credit
b. Rent Revenue, debit; Unearned Rent, credit
c. Unearned Rent, debit; Prepaid Rent, credit
d. Rent Expense, debit; Unearned Rent, credit
46. The unearned rent account has a balance of $40,000. If $3,000 of the $40,000 is unearned at the end of the
accounting period, the amount of the adjusting entry is
a. $3,000
b. $40,000
c. $37,000
d. $43,000
47. The following adjusting journal entry was found on page 4 of the journal. Select the best explanation for the entry.

Unearned Revenue 4,500

Fees earned 4,500
????????????????

a. Record payment of fees earned

b. Record fees earned at the end of the month
c. Record fees that have not been earned at the end of the month
d. Record the payment of fees to be earned.

Problem
48. Journalize in a two column journal the adjusting entries required at December 31, 2021. Omit explanations.

1. Fees accrued but unbilled are $6,000.

2. The supplies account balance on December 31 is $6,200. The supplies on hand are $1,150.
3. Wages accrued but not paid are $4,600.
4. Depreciation of office equipment is $3,200.
5. Rent expired during year, $9,300.
Date Description Post Ref Debit Credit

49. Prepare the following adjustments in good journal entry format.

(a) The beginning balance of the Supplies account was $315. During the month the
company bought additional supplies in the amount of $830. At the end of the month a
physical inventory showed $568 of unused supplies.
(b) The company has a Note Payable in the amount of $10,000 at an APR of 12%. The
note will be paid at the end of 6 months. The interest expense for the month needs to
be recorded.
(c) There are two employees at the North Park Store. One is a manager that gets paid on
the 15th of every month for his work during the first part of the month and on the 1st
of the following month for the second part of the month. His monthly salary is $2,500.
The other employee is an administrative assistant who gets a week pay of $450. The
last day of the month fell on Thursday.
(d) The unearned revenue account shows a balance of $35,000. According to the manager
60% of that amount has been earned.
(e) At the end of the month $8,400 of services had been performed but not yet billed.
50. For each of the following, journalize the necessary adjusting entry:

(a) A business pays weekly salaries of $15,000 on Friday for a five-day week ending on
that day. Journalize the necessary adjusting entry at the end of the fiscal period,
assuming that the fiscal period ends (1) on Wednesday, (2) on Thursday.
(b) The balance in the prepaid insurance account before adjustment at the end of the year
is $14,000. Journalize the adjusting entry required under each of the following
alternatives: (1) the amount of insurance expired during the year is $4,500, (2) the
amount of unexpired insurance applicable to a future period is $1,500.
(c) On July 1 of the current year, a business pays $36,000 to the city for license taxes for
the coming fiscal year. The same business is also required to pay an annual property
tax at the end of the year. The estimated amount of the current year's property tax
allocable to July is $3,200. (1) Journalize the two adjusting entries required to bring
the accounts affected by the taxes up to date as of July 31. (2) What is the amount of
tax expense for July?
(d) The estimated depreciation on equipment for the year is $24,000.