Quiz 2 (Chapter 4, 6, 7)

The balance in the prepaid rent account before adjustment at the end of the year is $12,000 and represents three months of rent paid on December 1. The adjusting entry required on December 31 is:

• debit Prepaid Rent, $4,000; credit Rent Expense $4,000.

• debit Rent Expense, $12,000; credit Prepaid Rent, $12,000.

• debit Prepaid Rent, $8,000; credit Rent Expense, $8,000.

• debit Rent Expense, $4,000; credit Prepaid Rent, $4,000.

Greese Company purchased office supplies costing $7,000 and debited Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $2,500 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be: 

• debit Supplies Expense, $4,500; credit Supplies, $4,500 

• debit Supplies Expense, $9,500; credit Supplies, $9,500 

• credit Supplies Expense, $4,500; debit Supplies, $4,500 

• credit Supplies Expense, $9,500; debit Supplies, $9,500 

The balance in the prepaid rent account before adjustment at the end of the year is $12,000, representing four months of rent paid on December 1. The adjusting entry required on December 31 is:

• credit Rent Expense, $4,000; debit Prepaid Rent, $4,000

• debit Rent Expense, $3,000; credit Prepaid Rent, $3,000

• credit Rent Expense, $3,000; debit Prepaid Rent, $3,000

• debit Rent Expense, $4,000; credit Prepaid Rent, $4,000

The Harris Company purchased equipment for $15,000 on December 1. It is estimated that the annual depreciation on the computer will be $3,000. If financial statements are to be prepared on December 31, the company should make the following adjusting entry: 

• debit Depreciation Expense, $3,000; credit Accumulated Depreciation, $3,000.

• debit Accumulated Depreciation, $250; credit Depreciation Expense, $250.

• debit Depreciation Expense, $250; credit Accumulated Depreciation, $250. 

• No adjusting entry is needed.

Leyland Realty Company received a check for $18,000 on July 1, which represents a 6-month advance payment of rent on a building it rents to a client. Unearned Rent Revenue was credited for the full $18,000. Financial statements will be prepared on July 31. Leyland Realty should make the following adjusting entry on July 31: 

• debit Unearned Rent Revenue, $3,000; credit Rent Revenue, $3,000. 

• debit Unearned Rent Revenue, $9,000; credit Rent Revenue, $9,000. 

• debit Unearned Rent Revenue, $18,000; credit Rent Revenue, $18,000.

• credit Unearned Rent Revenue, $9,000; debit Rent Revenue, $9,000. 

On January 1, 2016, Leardon Inc. purchased equipment for $25,000. The company is depreciating the equipment at the rate of $1,000 per month. As of January 31, 2017, the balance in Accumulated Depreciation is: 

• $13,000 credit balance

• $12,000 credit balance

• $1,000 credit balance

• $12,000 debit balance

At December 31, 2017, before any year-end adjustments, Janus Company's Prepaid Insurance account had a balance of $4,200. It was determined that $1,800 of the Prepaid Insurance had expired. The adjusted balance for Prepaid Insurance for the year would be: 

• $3,400.

• $1,800.

• $2,400.

• $6,000.

Baden Industries borrows $20,000 at an annual interest rate of 7% for six months on October 1, 2017. What is the appropriate journal entry to recognize interest payable if Baden ends its fiscal year on December 31, 2017?

• debit Interest Expense $420; credit Interest Payable $420. 

• debit Interest Expense $1,400; credit Interest Payable $1,400.

• debit Interest Expense $700; credit Interest Payable $700.

• debit Interest Expense $350; credit Interest Payable $350.

The goods are sold on credit for $30,000, terms 3/15, n/30. Which of the following entries correctly describes the cash collection?

• Cash is debited for $29,100; sales discounts are debited for $900; and accounts receivable is credited for $30,000 if the collection is within the discount period.

• Cash is debited for $30,000; accounts receivable is credited for $29,100; and sales discounts are credited for $900 if the collection is within the discount period. 
  

• Cash is debited for $29,100 and accounts receivable is credited for $29,100 if the collection is after the discount period. 
  

• Cash is debited for $25,500 and accounts receivable is credited for $25,500 if the collection is within the discount period.  

One of Trent Company's customers returned products that had been sold on account for $800. Which of the following correctly describes the effect on the financial statements of the return? 

• A contra-revenue account decreases $800 

• Accounts receivable decreases $800

• Sales returns and allowances decrease $800 

• Net sales increase $800