Question : 121. The net income reported the income statement $85,000. However, adjusting : 1251787

121. The net income reported on the income statement is $85,000.  However, adjusting entries have not been made at the end of the period for supplies expense of $2,200 and accrued salaries of $800.  Net income, as corrected, is 
A. $84,200
B. $85,000
C. $82,800
D. $82,000

122. At the end of the fiscal year, the usual adjusting entry to Prepaid Insurance to record expired insurance was omitted.  Which of the following statements is true? 
A. Total assets at the end of the year will be understated.
B. Stockholders’ equity at the end of the year will be understated.
C. Net income for the year will be overstated.
D. Insurance Expense will be overstated.

123. At the end of the fiscal year, the usual adjusting entry for depreciation on equipment was omitted.  Which of the following statements is true? 
A. Total assets will be understated at the end of the current year.
B. The balance sheet and income statement will be misstated, but the retained earnings statement will be correct for the current year.
C. Net income will be overstated for the current year.
D. Total liabilities and total assets will be understated.

124. At the end of the fiscal year, the usual adjusting entry for accrued salaries owed to employees was omitted.  Which of the following statements is true? 
A. Salary expense for the year was understated.
B. The total of the liabilities at the end of the year was overstated.
C. Net income for the year was understated.
D. Stockholders’ equity at the end of the year was understated.

125. The adjusting entry to adjust supplies was omitted at the end of the year.  This would effect  the  income statement by having   
A. expenses understated and therefore net income overstated
B. revenues understated and therefore net income understated
C. expenses understated and therefore net income understated
D. expenses overstated and therefore net income understated

126. Which of the accounts below would most likely appear on an adjusted trial balance but probably would not appear on the unadjusted trial balance? 
A. Fees Earned
B. Accounts Receivable
C. Unearned Fees
D. Depreciation Expense

127. Which of the accounting steps in the accounting process below would be completed last? 
A. preparing the adjusted trial balance
B. posting
C. preparing the financial statements
D. journalizing

128. When is the adjusted trial balance prepared? 
A. before adjusting journal entries are posted
B. after adjusting journal entries are posted
C. after the adjusting journal entries are journalized
D. before the adjusting journal entries are journalized

129. What is the purpose of the adjusted trial balance? 
A. to verify that all of the adjusting entries have been posted
B. to verify that the net income is correctly reported
C. to verify that no adjusting journal entry has been omitted
D. to verify the equality of the debit and credit balances

130. All of the following statements regarding vertical analysis are true except 
A. Vertical analysis may be prepared for several periods to analyze changes in relationships over time.
B. In a vertical analysis of a balance sheet, each asset item is stated as a percent of total assets.
C. In a vertical analysis of an income statement, each item is stated as a percent of total expenses. 
D. Major differences between a company’s vertical analysis and industry averages should be investigated.

131. Explain the difference between accrual-basis accounting and cash-basis accounting.

132. Indicate with a Yes or No whether or not each of the following accounts would, under normal circumstances, require an adjusting entry.

1.  Cash
2.  Prepaid Expenses
3.  Depreciation Expense
4.  Accounts Payable
5.  Accumulated Depreciation
6.  Equipment

1.  No
2.  Yes
3.  Yes
4.  Yes
5.  Yes
6.  No

133. Classify the following items as: (1) prepaid expense, (2) unearned revenue, (3) accrued expense, or (4) accrued revenue.

a)  Fees received but not yet earned.
b)  Fees earned but not yet received.
c)  Accumulated depreciation.
d)  Property tax accrual

a)  (2) unearned revenue
b)  (4) accrued revenue
c)  (1) prepaid expense
d)  (3) accrued expense

134. List the four basic types of accounts that require adjusting entries and give an example of each.

1. Prepaid expenses – Example: Prepaid insurance
2. Unearned revenues – Example: An attorney’s retainer fee
3. Accrued revenues – Example: Unpaid interest earned on a notes receivable
4.  Accrued expenses  – Example: Unpaid wages owed to employees