Financial Accounting and Reporting 9. A.

If a company reporting on a calendar year basis, paid

Institute of Accounts Business and Finance $18,000 cash on January 1 for one year of rent in advance
Finals Quiz 1 (lease beginning January 1), and adjusting entries are made at
the end of each month, the balance remaining in Prepaid
True or False Rent on December 1 should be $1,500.
B. Depreciation expense is an example of an accrued expense.
A. Both true
B. Both false
C. First statement is true. Second statement is false. 10. A. A company performs 20 days of work on a 30-day
D. First statement is false. Second statement is true contract before the end of the year. The total contract is
valued at $6,000 and payment is not due until the contract is
fully completed. The required adjusting entry includes a
1. A. The cash basis of accounting commonly increases the $4,000 debit to Unearned Revenue.
comparability of financial statements from period to period. B. A company entered into a 2-month contract for $50,000
B. Under the cash basis of accounting, no adjustments are on April 1. It earned $25,000 of the contract services in April
made for prepaid, unearned, and accrued items. and billed the customer. The company should recognize the
revenue when it receives the customer's check
2. A. Recording revenues early overstates current-period
income; recording revenues late understates current period 11. Failure to recognize the consumption of prepaid expenses will:
income. a. Overstates capital and understates liability
B. Recording expenses early overstates current-period b. Understates net income and overstates asset
income; recording expenses late understates current period c. Overstates net income and asset
income. d. Not affect liability but overstates expenses

3. A. The order of the flow of accounting data is (1) recording 12. An end-of-period adjustment involves
in journal, (2) recording on trial balance, (3) posting in ledger. A. A change in an account balance that is neither an accrual
B. For a month's transactions for a typical medium-sized nor deferral.
business, the fees earned account is likely to have only debit B. An adjustment that results in revenue or expenses being
entries. reported in a different time period from the associated cash
flows.
C. An exchange of resources between two departments in an
4. A. On October 15, a company received $15,000 cash as a organization.
down payment on a consulting contract. The amount was D. A recognition of the extra cash flows related to the year-
credited to Unearned Consulting Revenue. By October 31, end delivery of goods and services.
10% of the services required by the contract were completed.
The company will record consulting revenue of $1,500 from 13. A bill from Globe for the period was received by the company.
this contract for October. The bookkeeper recorded it as an expense but no payment is
B. The accrual basis of accounting reflects the principle that made yet. What would be the effect of this transaction in the
revenue is recorded when it is earned, not when cash is company’s financial record?
received. a. Increase in liability and decrease in capital
b. Decrease in asset and decrease in liability
5. A. Adjusting entries are designed primarily to correct c. Decrease in asset and increase in liability
accounting errors. d. Increase in liability and increase in capital
B. Adjustments are necessary to bring an asset or liability
account to its proper amount and also update a related 14. Adjusting entries are necessary in order to:
expense or revenue account. a. Detect and correct an erroneously recorded transaction
b. Prove that the debit and credit totals of the trial balance is equal
6. A. The adjusted trial balance must be prepared before the c. Correctly state the balances of accounts
adjusting entries are made. d. Facilitate the preparation of Financial Statements
B. An unadjusted trial balance is a list of accounts and
balances prepared before adjustments are recorded.
15. Upon viewing the worksheet of Love Company, you found out
that the total debit column of the Income Statement is
7. A. An adjusting entry often includes an entry to Cash. P515,000 and the total credit column is P551,000. Which of
B. Before an adjusting entry is made to recognize the cost of the following statements is correct?
expired insurance for the period, Prepaid Insurance and a. There is a transposition error that should be corrected
Insurance Expense are both overstated. b. The company’s operation resulted to a net income
c. The company’s operation resulted to a net loss
8. A. A company's month-end adjusting entry for Insurance d. The difference represents a net income which is extended
Expense is $1,000. If this entry is not made then expenses are to the debit column of the balance sheet
understated by $1,000 and net income is overstated by $1,000.
B. A contra account is an account linked with another
account; it is added to that account to show the proper
amount for the item recorded in the associated account.
16. During the year, the company received an advance payment 23. What account is credited to close the inventory on hand at the
from one of its tenants. The said rent is applicable for 18 end of reporting period under periodic inventory system?
months which will commence on the beginning of the next a. Purchases
b. Sales
accounting period. The appropriate presentation of this
c. Income and Expense Summary
advance payment in the company’s financial statement at the d. Cost of Goods Sold
end of its current accounting period is:
a. Asset – under Prepaid Rent 24. An adjusting entry will not take the format of which one of
b. Revenue – under Rent Revenue the following entries?
c. Expense – under Rent Expense a. A debit to an expense account and a credit to an asset
d. Liability – under Unearned Rent account.
b. A debit to a liability account and a credit to a revenue
17. If a company mistakenly forgot to record depreciation on account
office equipment at the end of an accounting period, the c. A debit to an asset account and a credit to a revenue
financial statements prepared at that time would show: account.
A) Assets overstated and equity understated. d. A debit to an expense account and a credit to a revenue
B) Assets and equity both understated. account.
C) Assets, net income, and equity overstated
D) Assets overstated, net income understated, and equity
overstated. 25. In preparing a 10-column worksheet

18. Upon receipt of full payment from a customer of their 3 years A. The beginning inventory is extended as a credit in the income
statement columns.
prepayments of advertisement, the company recorded the
B. The ending inventory is extended as a credit in the income
transaction by debiting cash and crediting unearned advertising statement columns and as a debit in the balance sheet columns.
revenue. At year-end, the adjusting entry for the said C. The beginning inventory is extended as a credit in the balance
transaction will include: sheet columns.
a. A debit to unearned advertising fee for unearned portion D. The ending inventory is extended as a debit in the income
b. A debit to unearned advertising fee for earned portion statement columns and as a credit in the balance sheet
c. A credit to unearned advertising fee for earned portion columns.
d. A credit to advertising revenue for the whole amount received
26. On January 1, 2019, the capital account of Zeke Lundas
19. Upon purchase of Insurance Policy for 2-year period, the Consultancy Services showed a balance of P140,000. During
company recorded the transaction by charging the whole the year, the owner invested additional P39,500 but made
amount of policy purchased to appropriate asset account. At withdrawal of P15,000. At the end of the year, the worksheet
year-end, the adjusting entry for the said transaction will prepared by the accountant showed that the debit totals of
include: Income Statement column is P286,250 and credit totals
a. A debit to expense account for expired portion showed P202,750. What is the balance of capital account at
December 31, 2019?
b. A credit to asset account for unexpired portion
a. P81,000
c. A credit to expense account for expired portion
b. P248,000
d. A debit to asset account for expired portion
c. P164,500
d. P199,750
20. Failure to journalize an adjusting entry related to depreciation
of a fixed asset will:
a. Not affect the liability 27. Tess, the accountant of Wedding Services failed to recognize
the following:
b. Understate the net income
c. Overstate the liability  Accrued utilities of P2,530
d. Understate the asset  Service fee earned but not yet received, P5,100
 Supplies consumption of P1,550
21. Which of the following is false of a worksheet?  Payment of fire insurance for the next accounting period,
a. It helps facilitate the preparation of financial statement P1,200
b. It is included as part of the published financial statements  Owner’s additional investment of P3,000
c. It provides balancing mechanism that helps to uncover What would be the effect of the above omissions in the net
accounting errors income of the company?
d. It provides a place where adjusting entries can be made a. Overstatement by P180
informally before they are journalized and posted b. Overstatement by P1,020
c. Overstatement by P3,000
22. Which of the following is a correct adjusting entry for d. Understatement by P1,020
Prepayments under Asset Method?
a. Debit – Prepaid insurance; Credit – Insurance expense
b. Debit – Unearned Rent; Credit – Rent revenue
c. Debit – Interest receivable; Credit – Interest Income
d. Debit – Rent expense; Credit – Prepaid rent
28. Adjusting entries are primarily needed for:
A. Accrual accounting.
B. Cash basis accounting. 36. Harry Corporation’s salaries expense for 2019 was P 155,000.
C. Business entity accounting. Accrued salaries payable on December 31, 2018 was P 15,650
D. Going concern accounting and P 12,845 on December 31, 2019. How much is the
salaries paid during 2019?
29. An adjusting entry in which revenue is recognized before the A. 183,495
related cash receipt occurs is B. 152,195
A. Deferral C. 126,505
B. Nominal D. 157,805
C. Special item
D. Accrual 37. In its 2018 financial statements, Rannie Co. reported interest
expense of P 85,000 in its income statement and cash paid
for interest of P 70,000 in its cash flow statement. There was
30. On September 15, a company paid P 10,000 for insurance
no prepaid interest or interest capitalization at either the
premiums for the current year and debited the amount to
beginning or the end of 2018. Accrued interest at December
Prepaid Insurance. At December 31, the bookkeeper forgot to
31, 2017 was P 20,000. What amount should Rannie report
record the amount expired. The omission has the following
as accrued interest payable in its December 31, 2018 balance
effect on the financial statements prepaid December 31
sheet?
A. understated assets
A. P 5,000
B. understated net income
C. overstated owner’s equity B. P 15,000
D. both (b) and (c) C. P 35,000
D. P 20,000
31. At the end of the fiscal year, the usual adjusting entry of
prepaid insurance to record expired insurance was omitted. 38. Two accounting principles central to accrual accounting basis
Which of the following statements are true? that are relied on in the adjusting process are:
A. Owner’s equity at the end of the year will be A. Revenue recognition and monetary unit.
understated. B. Revenue recognition and going-concern.
B. Total assets at the end of the year will be understated. C. Revenue recognition and Expense recognition
C. . Net income for the year will be overstated. (matching).
D. Insurance Expense will be overstated. D. Expense recognition (matching) and cost.

39. After a successful drive aimed at members of a specific

32. The balancing figure in the worksheet is net income or net loss. national association, Cengage Publishing Company received
There is net loss if a total of P 180,000 for 3-year subscriptions beginning April
a. the total of the credits exceeds the total of the debits in 1, 2018, and recorded this amount in the unearned revenue
the income statement columns. account. Assuming Cengage records adjustments only at the
b. in the balance sheet columns the total debits exceeds the end of the calendar year, the adjusting entry required to
total of the credits. reflect the proper balances in the accounts at December 31,
c. in the balance sheet columns, the total of the credits 2018 is to
exceeds the total of the debits. A. Debit subscription revenue for P 135,000 and credit unearned
d. the total of the credits is the same as the total of the revenue for P 135,000.
debits in the income statement columns. B. Debit unearned revenue for P 45,000 and credit subscription
revenue for P 45,000
33. The primary difference between deferred and accrued C. Debit unearned revenue for P 135,000 and credit subscription
expenses is that deferred expenses have: revenue for P 135,000.
A. Been incurred and accrued expenses have not D. Debit subscription revenue for P 45,000 and credit unearned
B. Not been incurred and accrued expenses have been incurred revenue for P 45,000.
C. Been recorded and accrued expenses have not been incurred
D. Not been recorded and accrued expenses have been incurred 40. Mary Anne Corp. pays commissions to its sales staff at the
rate of 3% of net sales. Sales staff are not paid salaries but
34. Louie Corporation’s interest income for 2019 was P 15,600. are given monthly advances of P 15,000. Advances are
Accrued interest receivable on December 31, 2018 was charged to commission expense, and reconciliations against
P 2,275 and P 8,400 on December 31, 2019. The cash commissions are prepared quarterly. Net sales for the year
received for interest during 2019 was ended March 31, 2018 were P 15 million. The unadjusted
A. 17,875 balance in the commissions’ expense account on March 31,
B. 21,725 2018 was P 400,000. March advances were paid on April 3,
C. 9,475 2018. In its income statement for the year ended March 31,
D. 26,275 2018, what amount should Mary Anne report as commission
expense?
35. Zoe Graphics pays its weekly salary of P 50,400 for a six-day A. P 465,000
workweek ending on Saturday. The company follows the B. P 415,000
calendar year ending December 31. Assuming that December C. P 450,000
31 falls on Monday, how much is accrued salaries to be D. P 400,000
reported in December 31 Statement of Financial Position?
A. P0
B. P 8,400
C. P 16,800
D. P 33,600
41. Katherine Co. owns an office building and leases the offices 45. On December 1, Year 1, a company sold services to a
under a variety of rental agreements involving rent paid in customer and accepted a note in exchange with a P 120,000
advance monthly or annually. Not all tenants make timely face value and an interest rate of 10%. The note requires that
payments of their rent. Katherine balance sheets contained both the principal and interest be paid at the maturity date,
the following data: December 1, Year 2. The company's accounting period is the
2017 2018
calendar year. What adjusting entry (related to this note)
would be required at December 31, Year 1 on the company's
Rent receivable P19,200 P24,800 books?
Unearned rentals 64,000 48,000 A. Deferred interest income P 1,000
Interest receivable P 1,000
During 2018, Katherine received P 160,000 cash from tenants. B. Interest income P 1,000
What amount of rental revenue should Katherine record for Interest receivable P 1,000
2018? C. Interest receivable P 1,000
A. P 133,200 Deferred interest P 1,000
B. P 181,600
income
C. P 144,000
D. Interest receivable P 1,000
D. P 170,800
Interest income P 1,000
42. Miguel Inc. reported an allowance for doubtful accounts of
$30,000 (credit) at December 31, 2019, before performing an
aging of accounts receivable. As a result of the aging, Miguel 46. Freddie Co.’s professional fees expense account had a
Inc. determined that an estimated $52,000 of the December balance of P 92,000 at December 31, 2018, before
31, 2019, accounts receivable would prove uncollectible. The considering year-end adjustments relating to the following:
adjusting entry required at December 31, 2019, would be  Consultants were hired for a special project at a total fee not to
exceed P 65,000. Freddie has recorded P 55,000 of this fee
A. Doubtful Accounts 22,000 based on billings for work performed in 2018.
Expense 22,000  The attorney’s letter requested by the auditors, dated January
Allowance for 28, 2019, indicated that legal fees of P 6,000 were billed on
Doubtful January 15, 2019 for work performed in November 2018 and
Accounts that unbilled fees for December 2018 were P 9,000.
B. Allowance for 22,000 What amount should Freddie report for professional fees
Doubtful Accounts 22,000 expense for the year ended December 31, 2018?
Accounts A. P 117,000
Receivable
B. P 98,000
C. Doubtful Accounts 52,000
Expense 52,000 C. P 107,000
Allowance for D. P 92,000
Doubtful
Accounts
D. Allowance for 52,000 47. On January 31, 2018, a company prepaid the 72,000 rental
Doubtful Accounts 52,000 fee for a parking lot it leases. The rental fee covered a 3-year
Doubtful period beginning February 1, 2018. What is the effect of this
Accounts transaction on the December 31, 2018 financial statements
Expense for each of the following?

43. Erlinda Company purchased equipment on November 1, A B C D

2019 and gave a 3-month, 9% note with a face value of Current 0 22,000 24,000 72,000
P 30,000. The December 31, 2019 adjusting entry is expenses
A. debit Interest Expense and credit Interest Payable, P 2,700. Prepaid 72,000 50,000 48,000 0
B. debit Interest Expense and credit Interest Payable, P 450. expenses
C. debit Interest Expense and credit Interest Payable, P 675.
D. debit Interest Expense and credit Cash, P 450.
48. Company's account balances at December 31, 2019 for
44. On September 1, Kristianne Company loaned P 100,000, at Accounts Receivable and the Allowance for Doubtful
12% annual interest, to a customer. Interest and principal will Accounts are $640,000 debit and $1,200 credit. Sales during
be collected when the loan matures one year from the issue 2019 were $1,500,000. It is estimated that 1% of sales will be
date. Assuming adjustments are only made at year-end, what uncollectible. The adjusting entry would include a credit to
is the adjusting entry for accruing interest that Kristianne the allowance account for
would need to make on December 31, the calendar year-end? a. $16,200.
A. Debit Interest Expense, P 12,000; credit Interest b. $6,400.
Payable, P 12,000 c. $13,800.
B. Debit Interest Expense, P 4,000; credit Interest d. $15,000.
Payable, P 4,000
C. Debit Interest Receivable, P 4,000; credit Interest
Revenue, P 4,000.
D. Debit Interest Receivable, P 12,000; credit Cash,
P 12,000
49. Dada Co. sells major household appliance service contracts 54. Beck Company owns equipment with an original cost of
for cash. The service contracts are for a one-year, two-year, P 95,000 and an estimated salvage value of P 5,000 that is
or three-year period. Cash receipts from contracts are being depreciated at P 15,000 per year using the straight-line
credited to Unearned Service Revenues. This account had a depreciation method, and only prepares adjustments at year-
balance of P 900,000 at December 31, 2018 before year-end end. The adjusting entry needed to record annual
adjustment. Service contracts still outstanding at December depreciation is:
31, 2018 expire as follows: A. Debit Depreciation Expense, P 15,000; credit
Equipment, P 15,000.
During 2019 P190,000 B. Debit Depreciation Expense, P 10,000; credit
During 2020 285,000 Accumulated Depreciation, P 10,000.
C. Debit Depreciation Expense, P 10,000; credit
During 2021 125,000 Equipment, P 10,000.
D. Debit Depreciation Expense, P 15,000; credit
What amount should be reported as Unearned Service Accumulated Depreciation, P 15,000.
Revenues in Dada’s December 31, 2018 balance sheet?
A. P 675,000 55. On November 1, Hailey Company loaned another company
B. P 710,000 P 100,000 at a 6.0% interest rate. The note plus interest will
C. P 475,000 not be collected until March 1 of the following year. The
D. P 600,000 company's annual accounting period ends on December 31,
and adjustments are only made at year-end. The adjusting
50. Cheska Company sells subscriptions to a specialized entry needed on December 31 is:
directory that is published semiannually and shipped to A. Debit Interest Expense, P 5,000; credit Interest Payable,
subscribers on April 15 and October 15. Subscriptions P5,000.
received after the March 31 and September 30 cutoff dates B. Debit Interest Expense, P 1,000; credit Note Payable,
are held for the next publication. Cash from subscribers is P1,000.
received evenly during the year and is credited to deferred C. Debit Interest Receivable, P 500; credit Interest Revenue,
revenues from subscriptions. Data relating to 2018 are as P 500.
follows: D. Debit Interest Receivable, P 1,000; credit Interest
Revenue, P 1,000.
Deferred revenues from subscriptions, P1,500,000
12/31/17 56. The Supplies on Hand account balance at the beginning of
Cash receipts from subscribers 7,200,000
the period was P 6,600. Supplies totaling P 12,825 were
purchased during the period and debited to Supplies on
In its December 31, 2018 balance sheet, Cheska should report Hand. A physical count shows P 3,825 of Supplies on Hand
deferred revenues from subscriptions of at the end of the period. The proper journal entry at the end
A. P 1,800,000 of the period
B. P 3,600,000 A. debits Supplies on Hand and credits Supplies Expense for
C. P 3,300,000 P 9,000.
D. P 5,400,000 B. debits Supplies Expense and credits Supplies on Hand for
P 12,825.
51. All of the following are true regarding unearned revenues C. debits Supplies on Hand and credits Supplies Expense for
except: P 15,600.
A. They are payments received in advance of services D. debits Supplies Expense and credits Supplies on Hand
performed. for P 15,600.
B. As they are earned, they become revenues.
C. The adjusting entry for unearned revenues 57. Monica Co.’s officers’ compensation expense account had a
increases assets and increases revenues. balance of P 490,000 at December 31, 2018 before any
D. The adjusting entry for unearned revenues appropriate year-end adjustment relating to the following:
increases revenues and decreases liabilities.  No salary accrual was made for the week of December 25-31,
2018. Officers’ salaries for this period totaled P 18,000 and
52. On September 1, 2018, Joper Corp. issued a note payable to were paid on January 5, 2019.
a Bank in the amount of P 450,000. The note had an interest
 Bonuses to officers for 2018 were paid on January 31, 2019 in
rate of 12 percent and called for three equal annual principal
the total amount of P 175,000.
payments of P 150,000. The first payment for interest and
The adjusted balance for officers’ compensation expense for
principal was made on September 1, 2019. At December 31,
the year ended December 31, 2018 should be
2019, Joper should record accrued interest payable of
A. P 683,000
A. P 11,000
B. P 508,000
B. P 16,500
C. P 665,000
C. P 12,000
D. P 18,000 D. P 490,000

53. Company received P 7,200 on April 1, 2018 for one year's

rent in advance and recorded the transaction with a credit to
a nominal account. The December 31, 2018 adjusting entry
is
A. debit Rent Revenue and credit Unearned Rent, P 5,400.
B. debit Rent Revenue and credit Unearned Rent, P 1,800.
C. debit Unearned Rent and credit Rent Revenue, P 1,800.
D. debit Unearned Rent and credit Rent Revenue, P 5,400.
 62. An analysis of Scyla Corp.’s unadjusted prepaid expense
58. A machine costing P 27,000 with a residual value of P 2,000 account at December 31, 2019 revealed the following:
is to be depreciated on a straight-line basis over 5 years. What
is the year-end adjusting entry?  An opening balance at $1,500 for Scyla’s comprehensive
A. Depreciation expense P 5,000 insurance policy. Scyla had paid an annual premium on
Machine P 5,000 July 1, 2018.
 A $3,200 annual insurance premium payment made July
B. Depreciation expense P 5,000 1, 2019.
Cash P 5,000  A $2,000 advance rental payment for a warehouse Scyla
leased for 1 year beginning January 1, 2020.
C. Machine P 27,000 In its December 31, 2019 balance sheet, what amount should
Cash P 20,000 Scyla report as prepaid expenses?
Depreciation expense 5,000 a. $5,200
Residual value 2,000 b. $3,600
c. $2,000
D. Depreciation expense P 5,000 d. $1,600
Accumulated depreciation P 5,000
63. Joey Inc’s fiscal year ended on November 30, 2019. The
balance in the prepaid insurance account as of November 30,
2019, was $35,200 (before adjustment) and consisted of the
59. Company paid $1,704 on June 1, 2019, for a two-year
following policies:
insurance policy and recorded the entire amount as Insurance
Expense. The December 31, 2019, adjusting entry is Policy Date of Date of Balance
a. debit Prepaid Insurance and credit Insurance Expense, $497. Purchase Expiration
A June 30, 2019 June 30, 2020 14,400
b. debit Insurance Expense and credit Prepaid Insurance, $497.
c. debit Insurance Expense and credit Prepaid Insurance, $1,207. B Dec. 1, 2017 Nov. 30, 2019 9,600
d. debit Prepaid Insurance and credit Insurance Expense, C April 1, 2018 March 31, 2020 11,200
$1,207.

The adjusting entry required on November 30, 2019, would be

60. Company's account balances at December 31, 2018 for
Accounts Receivable and the related Allowance for Doubtful A. Insurance Expense 24,000
Accounts are P 460,000 debit and P 700 credit, respectively. Prepaid Insurance 24,000
From an aging of accounts receivable, it is estimated that B. Insurance Expense 9,600
P 15,000 of the December 31 receivables will be Prepaid Insurance 9,600
uncollectible. The necessary adjusting entry would include a C. Insurance Expense 11,200
credit to the allowance account for Prepaid Insurance 11,200
A. P 15,700. D. Insurance Expense 16,400
B. P 15,000. Prepaid Insurance 16,400
C. P 14,300.
D. P 700
64. Chandler Company sells magazine subscriptions for one- to
61. Under Rachel Co.’s accounting system, all insurance premiums three-year subscription periods. Cash receipts from
paid are debited to prepaid insurance. For interim financial subscribers are credited to Magazine Subscriptions Collected
reports, Rachel makes monthly estimated charges to insurance in Advance, and this account had a balance of $11,600,000 at
expense with credits to prepaid insurance. Additional December 31, 2019, before year-end adjustment. Outstanding
information for the year ended December 31, 2020 is as subscriptions at December 31, 2019, expire as follows:
follows: During 2020 .................. $3,600,000
Prepaid Insurance, 110,000 During 2021 .................. 3,500,000
December 31, 2019 During 2022 .................. 1,500,000
Charges to insurance expense 437,500 In its December 31, 2019, balance sheet, what amount should
during 2020 (including a year- Winston report as the balance for magazine subscriptions
end adjustment of $10,500) collected in advance?
Prepaid insurance, 120,500
December 31, 2020 a. $3,600,000
b. $3,500,000
What was the total amount of insurance premiums paid by c. $8,600,000
Rachel during 2020? d. $11,600,000
a. $327,500
b. $427,000
c. $437,500
d. $448,000
65. On April 1, Santa Fe, Inc. paid Griffith Publishing Company
$1,548 for 36-month subscriptions to several different
magazines. Santa Fe debited the prepayment to a Prepaid
Subscriptions account, and the subscriptions started NAME:
immediately. What amount should appear in the Prepaid SECTION:
Subscription account for Santa Fe, Inc. after adjustments on ____________________________________
December 31 of the second year assuming the company is
using a calendar-year reporting period and the previous year
adjustment had been made? ANSWER SHEET
A) $1,548. 1 36
B) $645.
2 37
C) $387.
3 38
D) $516.
4 39
66. The periodic expense created by allocating the cost of plant 5 40
and equipment to the periods in which they are used, 6 41
representing the expense of using the assets, is called: 7 42
A) Accumulated depreciation. 8 43
B) A contra account. 9 44
C) The expense recognition (matching) principle. 10 45
D) Depreciation expense. 11 46
12 47
67. A company purchased new furniture at a cost of $14,000 on 13 48
September 30. The furniture is estimated to have a useful life 14 49
of 8 years and a salvage value of $2,000. The company uses 15 50
the straight-line method of depreciation. How much 16 51
depreciation expense will be recorded for the furniture for the 17 52
first year ended December 31? 18 53
A) $437.50 19 54
B) $375.00 20 55
C) $1,500.00 21 56
D) $500
22 57
23 58
68. A company purchased new furniture at a cost of $14,000 on
September 30. The furniture is estimated to have a useful life 24 59
of 8 years and a salvage value of $2,000. The company uses 25 60
the straight-line method of depreciation. What is the book 26 61
value of the furniture on December 31 of the first year? 27 62
A) $13,625.00 28 63
B) $13,562.50 29 64
C) $12,250.00 30 65
D) $12,500.00 31 66
32 67
69. On July 1, a company paid the $2,400 premium on a one-year 33 68
insurance policy with benefits beginning on that date. What 34 69
will be the insurance expense on the annual income statement 35 70
for the first year ended December 31?
A) $2,400.
B) $1,000.
C) $1,200.
D) $400.

70. The total amount of depreciation recorded against an asset

over the entire time the asset has been owned:
A) Is only recorded when the asset is disposed of.
B) Is referred to as depreciation expense.
C) Is referred to as accumulated depreciation.
D) Is shown on the income statement of the final period.