41) Bailey’s received its electric bill for December on December 31 but did not pay nor record it in the general journal. This resulted in:

A) understated assets.

B) overstated net income.

C) overstated liabilities.

D) understated capital.


42) Online Service received its telephone bill for January, but is not going to pay the bill until February. What adjustment is needed to record the transaction?

A) Debit Telephone Expense; credit Cash

B) Debit Accounts Payable; credit Telephone Expense

C) Debit Telephone Expense; credit Accounts Payable

D) Debit Accounts Payable; credit Cash


43) Which of the following is most likely to result in an adjusting entry at the end of the period?

A) Payment of two months’ insurance in advance

B) Payment of one month’s rent

C) Owner’s withdrawals

D) Payment for routine maintenance on the company van


44) Assuming no investments were made during the period, the balance of Capital shown on the worksheet is:

A) beginning capital.

B) ending capital.

C) net income.

D) net loss.

45) Adjusting entries affect:

A) the balance sheet.

B) the income statement.

C) Neither of these answers is correct.

D) Both A and B are correct.


46) Which of the following transactions would result in an accrual?

A) Salary expense has been incurred but unpaid.

B) Rent expired for the month.

C) Supplies used during the accounting period.

D) Equipment depreciated over the period.


47) The adjustment for depreciation was credited to Equipment and debited to Depreciation Expense. This would:

A) overstate the assets.

B) understate the assets.

C) overstate net income.

D) None of these are correct.


48) Which of the following accounts would most likely be depreciated?

A) Equipment

B) Office Supplies

C) Cash

D) Accounts Payable

49) When making the adjustment for prepaid insurance, instead of writing off only the time that has passed the entire policy was written off. This would:

A) overstate the assets.

B) overstate the liabilities.

C) understate net income.

D) None of these are correct.


50) The adjustment for accrued wages included the entire pay period, some of which occurs next month. This would:

A) understate the liabilities.

B) overstate the liabilities.

C) overstate net income.

D) None of these are correct.




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