Accounting Quiz

JJ Company owns a building. Which of the following statements regarding depreciation as used by accountants is false?

• As depreciation is recorded, stockholders’ equity is reduced.

• Depreciation is an estimated expense to be recorded over the building’s estimated useful life.

• As depreciation is recorded, the net book value of the asset is reduced.

• As the value of the building decreases over time, it “depreciates.”

Failure to make an adjusting entry to recognize accrued salaries payable would cause which of the following?

• An understatement of expenses, liabilities, and stockholders’ equity.

• An understatement of expenses and liabilities and an overstatement of stockholders’ equity.

• An overstatement of assets and stockholders’ equity.

• An overstatement of assets and liabilities.

Which of the following accounts would not appear in a closing entry?

• Salary Expense

• Interest Income

• Accumulated Depreciation

• Retained Earnings

Which account is least likely to appear in an adjusting journal entry?

• Cash

• Interest Receivable

• Property Tax Expense

• Salaries Payable

On June 1, 2019, Oakcrest Company signed a three-year $110,000 note payable with 9 percent interest. Interest is due on June 1 of each year beginning in 2020. What amount of interest expense should be reported on the income statement for the year ended December 31, 2019?

• $5,250

• $9,900

• $4,950

• $5,775

At the beginning of the current year, Donna Company had $1,000 of supplies on hand. During the current year, the company purchased supplies amounting to $6,400 (paid for in cash and debited to Supplies). At the end of the current year, a count of supplies reflected $2,000. The adjusting entry Donna Company would record at the end of the current year to adjust the Supplies account would include a

• Debit to Supplies for $2,000.

• Credit to Supplies Expense for $5,400.

• Credit to Supplies for $5,400.

• Debit to Supplies Expense for $4,400.

On October 1, 2020, the $12,000 premium on a one-year insurance policy for the building was paid and recorded as Prepaid Insurance Expense. On December 31, 2020 (end of the accounting period), what adjusting entry is needed?

• Insurance expense (+E) 2,000 Prepaid insurance expense (−A) 2,000

• Insurance expense (+E) 3,000 Prepaid insurance expense (−A) 3,000

• Prepaid insurance expense (+A) 3,000 Insurance expense (−E) 3,000

• Prepaid insurance expense (+A) 9,000 Insurance expense (−E) 9,000

Which of the following accounts is considered a contra account?

• Accumulated Depreciation

• Interest Income

• Salaries Payable

• Prepaid Rent

What is the purpose of an adjusting journal entry in accounting?

• To correct errors made in the initial recording of transactions

• To update the financial statements to reflect the current financial position

• To record transactions that occurred after the end of the accounting period

• To calculate the total revenue generated by the business

What is the purpose of a closing entry in accounting?

• To adjust the financial statements for errors made during the accounting period

• To transfer temporary account balances to the permanent accounts

• To record transactions that occurred after the end of the accounting period

• To calculate the total expenses incurred by the business