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Exam 15: Adjusting Entries and a Trial Balance

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Question 1

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The adjustment unique to merchandising businesses adjusts

A) Accounts Receivable.
B) Accumulated Depreciation.
C) Merchandise Inventory.
D) Prepaid Insurance.

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Question 2

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Depreciation expense is calculated using all of the following amounts except

A) fair market value.
B) estimated salvage value.
C) estimated useful life.
D) original cost.

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Question 3

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The adjustment for unpaid federal income tax includes a(n)

The difference between an asset's account balance and its related contra account is called book value.

Revenue earned in one fiscal period but not received until a later fiscal period is called accrued revenue.

For a business using the periodic inventory method, the balance of Merchandise Inventory in the unadjusted trial balance represents the beginning balance plus all purchases of merchandise made in the fiscal period.

Estimated federal income tax must be paid in monthly installments.

The book value of a plant asset is its original cost minus accumulated depreciation.

The Income Summary account is one of the accounts used to adjust the Merchandise Inventory account at the end of the fiscal period.

Depreciation expense is recorded on all plant assets.

A physical inventory is always conducted at the end of each

Recording depreciation expenses is an application of the accounting concept

A business can use any 12-month period for reporting its financial performance.

All accounts are listed on the unadjusted trial balance regardless of whether there is a balance or not.

Cash and other assets expected to be exchanged for cash or consumed within a year are called liquid assets.

For a business using the periodic inventory method, purchases are recorded in the Merchandise Inventory account.

The tax rate associated with an income tax bracket is called the effective tax rate.

Functional depreciation should be considered in estimating the useful life of computer equipment.

The value of the insurance coverage used is recorded as a debit to Insurance Expense.

Annual straight-line depreciation expense of a plant asset is calculated as the original cost of the plant asset divided by the years of estimated useful life.