FABM1_Quiz4

ABC Company purchased office supplies worth 1,000 on December 15th. The supplies were immediately recorded as an expense. However, on December 31st, physical counts revealed that 400 worth of supplies were still unused. What adjusting entry should be made to correct this situation?

• Debit Supplies Inventory 400, Credit Supplies Expense 400
• Debit Office Supplies Expense 600, Credit Supplies Inventory 600
• Debit Supplies Expense 400, Credit Supplies Inventory 400
• Debit Supplies Expense 600, Credit Supplies Inventory 600

XYZ Company prepaid 6,000 for a two-year insurance policy on January 1st. The entire amount was initially recorded as an asset. At the end of the current year, XYZ Company needs to make an adjusting entry to reflect the portion of insurance expense that has been incurred during the year. Which of the following journal entries would be appropriate for this adjustment?

• Debit Prepaid Insurance $3,000 and Credit Insurance Expense $3,000
• Debit Insurance Expense $6,000 and Credit Prepaid Insurance $6,000
• Debit Insurance Expense $3,000 and Credit Cash $3,000
• Debit Insurance Expense $3,000 and Credit Prepaid Insurance $3,000

On December 1st, Your Company received an advanced payment of 1,200 from a customer for services to be provided over a six-month period. The full amount was initially recorded as unearned revenue. What adjusting entry you should be made at the end of the accounting period to reflect the portion of revenue that has been earned during that period?

• Debit Revenue 200, Credit Unearned Revenue 200

• Debit Unearned Revenue 300, Credit Revenue 300
• Debit Unearned Revenue 500, Credit Revenue 500
• Debit Unearned Revenue 1000, Credit Revenue 1000

A merchandising business purchased inventory worth 10,000 on credit. Shortly after, it sold the entire inventory for 15,000 in cash. How would this transaction impact the business's financial statements?

• The transaction would have no impact on the financial statements.
• The transaction would increase assets and equity.
• The transaction would decrease liabilities and equity.
• The transaction would decrease assets and liabilities.

Which of the following best describes the purpose of adjusting entries in the accounting process?

• To correct errors made in previous financial statements.

• To record transactions that occurred after the end of the accounting period.

• To allocate revenues and expenses to the appropriate accounting periods.

• To reconcile discrepancies between the cash balance and the bank statement.

Which of the following best describes the primary source of revenue for a merchandising business?

• Investment income.

• Service fees.

• Sales of goods.

• Rental income.

Which of the following statements best describes adjusting entries?

• Adjusting entries are made to correct errors in financial statements.

• Adjusting entries are made to update the general ledger with the latest transactions.

• Adjusting entries are made to allocate revenue and expenses to the appropriate accounting periods.

• Adjusting entries are made to record the purchase and sale of long-term assets.

What best describes the accounting cycle?

• The process of recording financial transactions in a chronological order.

• The process of preparing financial statements at the end of each accounting period.

• The process of analyzing financial data to assess the financial health of a company.

• The recurring set of steps performed in the accounting process to record, summarize, and report financial information.

Design a step-by-step procedure for recording and posting of a cash transaction in the accounting cycle. Which of the following would you consider?

• Analyzing the transaction, recording in the journal, posting to the general ledger.

• Reviewing vendor invoices, preparing financial statements, collecting customer payments.

• Calculating depreciation expense, reconciling bank statements, preparing adjusting entries.

• Identifying source documents, recording in the general journal, posting to the accounts payable ledger.

Why is the purchase of inventory an important aspect of transactions in a merchandising business?

• It helps maintain cash flow within the business.

• It allows the business to offer a wider range of products.

• It facilitates the provision of services to customers.

• It enables the business to acquire intellectual property rights.