CPB / BookKeeping Adjusting Entries and Reconciliations Questions and Answers

Question 1

A company performs a bank reconciliation and finds that a check for $450 written to a supplier was incorrectly recorded in the company's cash book as $540.
How should this error be treated during the reconciliation?

Accepted Answer

Add $90 to the cash book balance.

Answer

Subtract $90 from the bank statement balance.

Answer

Add $90 to the bank statement balance.

Answer

Subtract $90 from the cash book balance.

Question 2

On December 1st, a company pays $6,000 for a six-month insurance policy. If the company prepares financial statements on December 31st, what is the correct adjusting entry to record insurance expense?

Accepted Answer

Debit Insurance Expense $1,000, Credit Prepaid Insurance $1,000

Answer

Debit Insurance Expense $6,000, Credit Prepaid Insurance $6,000

Answer

Debit Prepaid Insurance $1,000, Credit Insurance Expense $1,000

Answer

Debit Insurance Expense $1,000, Credit Cash $1,000

Question 3

Which of the following is the primary purpose of making adjusting entries?

Accepted Answer

To apply the matching principle by recording revenues when earned and expenses when incurred.

Answer

To correct errors made in the general ledger during the period.

Answer

To prepare the cash book for the bank reconciliation.

Answer

To ensure that all cash transactions are recorded before closing the books.

Question 4

A business receives a $1,200 payment from a customer on March 15 for services to be provided evenly over the next three months (April, May, and June). What is the adjusting entry required on April 30?

Accepted Answer

Debit Unearned Revenue $400, Credit Service Revenue $400

Answer

Debit Cash $400, Credit Service Revenue $400

Answer

Debit Service Revenue $400, Credit Unearned Revenue $400

Answer

Debit Unearned Revenue $1,200, Credit Service Revenue $1,200

Question 5

During a bank reconciliation, which of the following items would require an adjustment to the company's cash account records?

Accepted Answer

Bank service charges

Answer

Outstanding checks

Answer

Deposits in transit

Answer

Errors made by the bank

Question 6

A company purchased a machine for $50,000 with an estimated useful life of 10 years and no salvage value. Using the straight-line method, what is the annual adjusting entry for depreciation?

Accepted Answer

Debit Depreciation Expense $5,000, Credit Accumulated Depreciation $5,000

Answer

Debit Depreciation Expense $5,000, Credit Cash $5,000

Answer

Debit Accumulated Depreciation $5,000, Credit Depreciation Expense $5,000

Answer

Debit Machine $5,000, Credit Accumulated Depreciation $5,000

A company performs a bank reconciliation and finds that a check for $450 written to a supplier was incorrectly recorded in the company's cash book as $540.How should this error be treated during the reconciliation?

A company performs a bank reconciliation and finds that a check for $450 written to a supplier was incorrectly recorded in the company's cash book as $540.
How should this error be treated during the reconciliation?