Quiz on Day 6&7
1) Which of the following statements is incorrect?
a. Adjusting journal entries impact the Cash account.
b. An adjusting entry for accrued expenses debits an expense account.
c. Accruals increase both a statement of financial position account and an income
statement account.
d. An adjusting entry for prepaid expenses credits an asset account.
e.none of the above
2) On April 1, 2022, Lansing Corporation opened for business and paid $600 in insurance
to cover the next 12 months. The corporation is preparing financial statements for the
period ending December 31, 2022. What amount of insurance expense should be recognized
for Lansing’s first year of operations?
a. $600
b. $0
c. $450
d. $150
3) On July 1, East Lake, Inc. purchased a 2-year insurance policy for $12,600 cash. Prepaid
Insurance was debited for the entire amount. On December 31, when the year-end financial
statements are prepared, assuming adjusting entries are made annually, the appropriate
adjusting journal entry to be made would be to
a. debit Prepaid Insurance $2,100; credit Insurance Expense $2,100.
b. debit Insurance Expense $9,450; Credit Prepaid Insurance $9,450.
c. debit Prepaid Insurance $12,600; credit Insurance Expense $12,600.
d. debit Insurance Expense $3,150; credit Prepaid Insurance $3,150.
4) Equipment costing $6,000 had a useful life of five years. The adjusting journal entry to
record the depreciation for one month would consist of
a. a debit to Depreciation Expense for $1,200 and a credit to Equipment for $1,200.
b. a debit to Depreciation Expense for $100 and a credit to Accumulated depreciation for
$1200.
c. a credit to Depreciation Expense for $100 and a debit to Accumulated Depreciation—
Equipment for $100.
d. a debit to Depreciation Expense for $100 and a credit to Accumulated Depreciation—
Equipment for $100.
5) On June 1, 2022, RentMe Inc. agreed to rent a building to Thomlinson Corp. for a 12-month
period. Thomlinson Corp. paid $20,000 upfront as a rental fee. RentMe Inc. is preparing
financial statements for the period ending December 31, 2022. What amount of rent should be
reported as deferred revenue at year end?
a. $20,000
b. $0
c. $8,333
d. $11,667
6) Selcomm Communications received cash of $12,000 on October 1, 2022 as prepayment
for 12 months’ rent. The accountant recorded the cash receipt as a credit to Rent Revenue
and a debit to Cash. What is the year-end adjusting entry on December 31, assuming
adjusting entries are prepared annually?
a. a debit to Rent Revenue and a credit to Deferred Rent, $3,000
b. a debit to Rent Revenue and a credit to Deferred Rent, $9,000
c. a debit to Deferred Rent and a credit to Rent Revenue, $3,000
d. a debit to Cash and a credit to Deferred Rent, $9,000