CP ACCOUNTING
Chapter 4 TEST REVIEW
Name ________________________
TRUE/FALSE
The book value of an asset is always equal to the asset’s true market value.
The purpose of adjustments is to correct account amounts that are incorrect.
If the total of the Income Statement Debit column is larger than the total of the Income Statement credit column, the company must
have a net loss.
The purpose of depreciating an asset is to spread out the cost of the asset over its useful life.
Adjusting entries recorded on a work sheet must also be journalized.
The normal balance of accumulated Depreciation, Equipment, is on the debit side.
The purpose of a worksheet is to enable the accountant to prepare the financial statements.
The Drawing account is recorded on a worksheet in the Trial Balance debit column, the Adjusted Trial Balance Debit column, and the
Income Statement Debit column.
Each adjusting entry involves both an income statement account and a balance sheet account.
The cost of insurance used will appear in the Adjustments Debit column, the Adjusted Trial Balance Debit column, and the Income
Statement Debit column.
MULTIPLE CHOICE
The balance in the Prepaid Insurance account before adjustment at the end of the year is $840, which represents 12 months’
insurance. The adjusting entry required for 1 month of insurance is
a. 840Debit Prepaid Insurance, $840, credit Insurance Expense, $840
b. Debit Prepaid Insurance, $70, credit Insurance Expense, $70
c. Debit Insurance Expense, $70, credit Prepaid Insurance, $70
d. Debit Insurance expense, $840, credit Prepaid Insurance, $
If total credits exceed total debits in the Income Statement columns of a worksheet
a. A net loss has occurred
b. A net income has occurred
c. No conclusion can be drawn until the closing entries have been made
d. A mistake has been made
Porter Company bought equipment on January 1 of this year for $14,000. At the time of purchase, the equipment was estimated to
have a useful life of 7 years and a trade in value of $1,500. Using the straight line method, the amount of 1 year’s depreciation is
a. $12500
b. $1785.50
c. $166.67
d. $2,000
Accrued wages are
a. Wages that have been earned but not paid.
b. Wages that were earned and have been paid.
c. Wages that have been paid.
d. Wages that have been neither earned nor paid.
Depreciation is
a. An expense that is incurred during an accounting period.
b. Used to show a more proper balance in the equipment account by subtracting accumulated depreciation from the
equipment account.
c. An estimate of the loss of usefulness of equipment during an accounting period.
d. All of these
CP ACCOUNTING
Chapter 4 TEST REVIEW
Name ________________________
The adjusting entry to record depreciation of equipment is
a. Debit Accumulated Depreciation, credit Depreciation Expense
b. Debit Depreciation Expense, credit Accumulated Depreciation
c. Debit Equipment, credit Accumulated Depreciation
d. Debit Depreciation Expense, credit Equipment
Accumulated Depreciation, Equipment, is shown as
a. A liability on the balance sheet
b. A deduction from net income on the statement of owner’s equity
c. A contra account on the balance sheet
d. An expense on the income statement
The Income Statement Debit column of the worksheet contains
a. Asset account balances
b. Revenue account balances
c. Liability account balances
d. Expense account balances
The type of account and normal balance of Accumulated Depreciation is
a. Asset, debit
b. Asset, credit
c. Contra asset, credit
d. Contra asset, debit
If equipment cost $54,000 and accumulated depreciation amounts to $3,750, the book value of the equipment is
a. $57,750
b. $3,750
c. $54,000
d. $50,250
ADJUSTING ENTRIES
Record the adjusting entries directly in the T accounts, and label the other account.
Insurance expired, $480
Bal.
Additional Depreciation,
$650
Prepaid Insurance
1200
Accumulated Depreciation,
Equipment
Bal. 4500
CP ACCOUNTING
Chapter 4 TEST REVIEW
Name ________________________
Accrued wages, $1000
Bal.
Supplies used, $75
Bal.
Insurance expired, $95
Wages Expense
4980
Supplies
150
Prepaid Insurance
Bal.
560
ANALYZING THE WORKSHEET
Directions: Carry the balances forward from the Trial Balance columns to the appropriate column by placing an “X” in the
appropriate cells. The first one is done for you.
Account Name
Equipment
Insurance Expense
T. Ewing, Capital
Accounts Receivable
Cash
T. Ewing, Drawing
Wages Expense
Wages Payable
Income From Services
Depreciation Exp, Machinery
Accumulated Depr, Machinery
Advertising Expense
Rent Expense
Accounts Payable
Trial Balance
Debit Credit
X
Adjustments
Debit
Credit
Adj. Trial Bal
Debit Credit
X
Income Stmt
Debit Credit
Balance Sheet
Debit credit
X