CPB / BookKeeping Adjusting Entries and Reconciliations 2

Question 1

A company pays $12,000 for a 12-month insurance policy on October 1. What is the adjusting entry on December 31?

Accepted Answer

Debit Insurance Expense $3,000; Credit Prepaid Insurance $3,000

Answer

Debit Prepaid Insurance $3,000; Credit Insurance Expense $3,000

Answer

Debit Insurance Expense $12,000; Credit Cash $12,000

Answer

Debit Insurance Expense $9,000; Credit Prepaid Insurance $9,000

Question 2

Which of the following is an example of an accrued liability requiring an adjusting entry?

Accepted Answer

Wages earned by employees but not yet paid

Answer

Unearned revenue received in advance

Answer

Prepaid rent paid at the start of the period

Answer

Depreciation on office equipment

Question 3

At year-end, $500 of interest has accrued on a note receivable. What is the correct adjusting entry?

Accepted Answer

Debit Interest Receivable $500; Credit Interest Revenue $500

Answer

Debit Interest Revenue $500; Credit Notes Receivable $500

Answer

Debit Cash $500; Credit Interest Revenue $500

Answer

Debit Interest Expense $500; Credit Interest Payable $500

Question 4

When reconciling a bank statement, a deposit in transit should be:

Accepted Answer

Added to the bank balance

Answer

Subtracted from the book balance

Answer

Subtracted from the bank balance

Answer

Added to the book balance

Question 5

A bank reconciliation shows a bank service charge of $25 not yet recorded in the books. What entry should the bookkeeper make?

Accepted Answer

Debit Bank Charges Expense $25; Credit Cash $25

Answer

Debit Cash $25; Credit Bank Charges Expense $25

Answer

No entry needed; adjust only the bank balance

Answer

Debit Accounts Payable $25; Credit Cash $25

Question 6

Straight-line depreciation on equipment costing $10,000 with a $1,000 salvage value over 5 years results in what annual adjusting entry amount?

Accepted Answer

$1,800

Answer

$2,000

Answer

$1,000

Answer

$2,500

Question 7

Which account is credited when recording the adjusting entry for depreciation?

Accepted Answer

Accumulated Depreciation

Answer

Depreciation Expense

Answer

Equipment

Answer

Cash