Accounting Chapter 18

Every adjustment affects one permanent and one temporary account.

• True

• False

The value of merchandise on hand is most accurately determined by a physical inventory.

• True

• False

If the Merchandise Inventory account is credited in the Adjustments section, it means that the ending inventory is greater than the beginning inventory.

• True

• False

The balance for Supplies in the Trial Balance section of the work sheet represents the beginning Supplies balance minus any supplies used during the period.

• True

• False

Federal Corporate Income Tax Payable is a liability account.

• True

• False

What is an expense paid in advance?

• prepaid expense

• supplies

• estimate

• adjusting entries

Which of the following statements is incorrect concerning an adjusted trial balance?

• an adjusted trial balance shows proper balance sheet and income statement amounts

• an adjusted trial balance is prepared before the adjusting entries have been journalized and posted

• all of the other statements are true

• an adjusted trial balance lists the account balances and their locations in the ledger

A store purchased a one-year insurance policy for $1,800 on Sept. 1.  Its fiscal period ended on Dec. 31.  What is the amount of the adjustment and what accounts are debited and credited on Dec. 31?

• $1,800 - insurance expense and prepaid insurance

• $600 - insurance expense and prepaid insurance

• $1,200 - insurance expense and prepaid insurance

• $600 - prepaid insurance and insurance expense

The Income Summary amount in a worksheet's adjustment Debit column represents the ___________.

• decrease in Merchandise Inventory

• increase in Merchandise Inventory

• beginning Merchandise Inventory

• ending Merchandise Inventory

The ending balance of the Supplies account appears

• in the Trial Balance columns of the worksheet

• in the Income Statement columns of the worksheets

• in the Balance Sheet columns of the worksheet

• on the statement of changes in owner's equity