Question

Use the following information to answer questions 22–24. On July 1, 20X0, CriCo takes out a 10%, $10,000 note payable that is due on July 1, 20X1. No interest is accrued at year-end 20X0. 24. To correct this error in 20X0, you need to record just the adjusting entry that was not made because . . . a. an expense account is involved b. no error was made recording the note payable on July 1, 20X0 c. an accrual is involved rather than a deferral d. the books have not been closed

26. On October 1, 20X1, MarCo signs a one-year, 8% note payable for $10,000
with principle and interest due on October 1, 20X2. It is MarCo’s only
note outstanding. On October 1, 20X2 when the note is paid, MarCo debits
Notes Payable and credits Cash for $10,800, the sum of principle and
interest. This error is likely to be found because . . .
a. the bank reconciliation will be out of balance when the check clears
b. the trial balance will be out of balance by $800
c. the trial balance will show a balance in Notes Payable that is not
normal
d. interest expense will be understated

39. Which of the following is an example of an accrual error?
a. failure to adjust Prepaid Insurance to its proper balance at
year end
b. failure to adjust Inventory to its proper balance at year end
c. failure to record depreciation at year end
d. none of the above

44. Which of the following is an accurate description of how failure to record
an accrual is likely to be found?
a. An expense that was not accrued is paid, but there is no payable
on the books as there should be.
b. A revenue that was not accrued is received, but there is no receivable
on the books as there should be.
c. A review of the trial balance reveals that an asset or liability
account that is normally present after accruals are recorded is
not present.
d. All above statements are accurate descriptions of how failure to
record an accrual is likely to be found.

49. If trial balance total debits are $72,000 and total credits are $74,700, then
the error cannot be . . .
a. a slide
b. a doubling error
c. a transposition for which you can find the error by investigating
each account where the difference between the first two digits of
its balance is 3
d. Actually, you can find the error using a, b or c.

Answer 1

Question 24-:

The accrual of interest expense has not been made at year end. So an adjustment entry needs to be passed to correct this error.

Option (a) is incorrect because as of now no expense has been booked.

Option (b) Incorrect because it is an error

Option (c) Correct. Interest expenses should have been an accrual rather than a deferral.

Option (d) Incorrect. As the year end is 2010 and books must to be closed.

Hence the correct option is (c).

Question 26-:

Option (a) Incorrect. This will not affect BRS.

Option (b) Incorrect as Trial Balance will be tallied

Option (c) Partial Correct. Notes payable will show a debit balance.

Option (d) Correct. Due to this error, Interest expenses will be understated.

Hence the correct option will be (d)

Question 39-:

Option (a) prepaid expenses needs to be accrued over the period, hence it is an accrual error.

Option (b) This is not an accrual error instead improper recording.

Option (c) This is also a recording error instead of accrual error.

Option (d) Incorrect.

Hence the correct option will be option (a)

Question 44

Option (a) Correct. If we will not booked accruals then liability will come. So at the time of payment it can be found.

Option (b) Correct receivable should be there to record revenue.

Option (c) Correct. Review of trial balance will generally detect this error.

Option (d) Correct. All the statements mentioned above are correct.

Hence the correct option is (d) since all the statements are correct.

Question 49-:

Option (d) This error can be present by any of the reasons as mentioned in option (a), (b) and (c).