Question : 81.In which of the following situations would an adjusting entry : 1237584

 

 

81.In which of the following situations would an adjusting entry be made at the end of January to record an accrued expense?   

A. Ramona’s Nursery purchased playground equipment on January 1 with an estimated useful life of six years.

 

B. On January 25, Ramona’s Nursery hired a college student to drive the minibus; the new employee is to begin work in February.

 

C. January 31 falls on a Tuesday; salaries are paid on Friday of each week.

 

D. On January 31, Ramona’s Nursery paid the interest owed on a note payable for January.

 

 

 

 

82.As of January 31, Princess Company owes $500 to Butler Co. for equipment rented during January. If no adjustment is made for this item at January 31, how will Princess’s financial statements be affected?   

A. Cash will be overstated at January 31.

 

B. Net income for January will be overstated.

 

C. Owners’ equity will be understated.

 

D. The financial statements will be accurate since the $500 does not have to be paid yet.

 

 

 

 

83.Which of the following is not considered an end-of-period adjusting entry?   

A. The entry to record the portion of unexpired insurance which has become expense during the period.

 

B. An entry to record revenue which has been earned but has not yet been billed to customers.

 

C. The entry to record depreciation expense.

 

D. An entry to record repayment of a bank loan and to recognize related interest expense.

 

 

 

 

84.The accrual of interest on a note payable will:   

A. Reduce total liabilities.

 

B. Increase total liabilities.

 

C. Have no effect upon total liabilities.

 

D. Will have no effect upon the income statement but will affect the balance sheet.

 

 

 

 

Omega Company adjusts its accounts at the end of each month. The following information has been assembled in order to prepare the required adjusting entries at December 31:(1) A one-year bank loan of $720,000 at an annual interest rate of 12% had been obtained on December 1.(2) The company pays all employees up-to-date each Friday. Since December 31 fell on Tuesday, there was a liability to employees at December 31 for two day’s pay amounting to $6,800.(3) On December 1, rent on the office building had been paid for four months. The monthly rent is $6,000.(4) Depreciation of office equipment is based on an estimated useful life of six years. The balance in the Office Equipment account is $9,360; no change has occurred in the account during the year.(5) Fees of $9,800 were earned during the month for clients who had paid in advance.

 

85.Refer to the information above. What amount of interest expense has accrued on the bank loan?   

A. $6,400.

 

B. $7,000.

 

C. $7,200.

 

D. $7,800.

$720,000 × .12 × 1/12 = $7,200

 

 

 

86.Refer to the information above. The accrued interest should be:   

A. Debited to Notes Payable.

 

B. Credited to Interest Payable.

 

C. Credited to Cash.

 

D. Credited to Interest Expense.

 

 

 

 

87.Refer to the information above. By what amount will the book value of the office equipment decline after the appropriate December adjustment is recorded?   

A. $1,560.

 

B. $130.

 

C. $0.

 

D. $1,430.

$9,360/72 = $130

 

 

 

88.Refer to the information above. After the appropriate adjusting entry is recorded, the balance in the liability account Unearned Fees will:   

A. Decrease by $9,800.

 

B. Increase by $9,800.

 

C. Equal $9,800.

 

D. Be unaffected.

 

 

 

 

89.Refer to the information above. The entry to record rent expense will include:   

A. A debit to Prepaid Rent for $6,000.

 

B. A credit to Prepaid Rent for $6,000.

 

C. A credit to Prepaid Rent for $18,000.

 

D. A debit to Prepaid Rent for $18,000.

 

 

 

 

90.Refer to the information above. Failure to make the appropriate adjustment to the Salary Expense account will:   

A. Understate net income for December by $6,800.

 

B. Understate net income for January by $6,800.

 

C. Overstate total liabilities at December 31.

 

D. Overstate the balance in Cash at December 31.