Question

1. Which of the following refers to any period of time covering a complete accounting cycle?

a) A matching cycle

b) A time cycle

c) A journal period

d) A fiscal period

2. An asset's book value represents the true market value of the asset.

False

True

3. In recording the adjusting entries for depreciation, both accounts involved are increased.

False

True

4. Any additional investments by the owner should be shown as a(n)

a) addition on the Income Statement.

b) subtraction on the Statement of Owner’s Equity.

c) addition on the Statement of Owner’s Equity.

d) subtraction on the Income Statement.

5. Sunny Day Company has $740 of supplies reported on its unadjusted trial balance as of July 31. During the month of July Sunny Day Company used $325 worth of supplies. What is the entry to adjust supplies?

a) Supplies $415

Supplies Expense $415

b) Supplies Expense $325

Cash $325

c) Supplies Expense $325

Supplies $325

d) Supplies Expense $415

Supplies $415

6. The amount of net income will appear on the debit side of the Income Statement columns on a work sheet,

a) if total revenue exceeded total expenses for the period.

b) if total assets exceeded total liabilities for the period.

c) if withdrawals have been made during the period.

d) if net income exceeds the owner's withdrawals.

e) if total expenses exceeded total revenue for the period.

7. Assume that Gatesville Co. pays its employees $1,200 per day and that pay day falls on Friday. Gatesville Co. employees work Monday through Friday. Assume the last day of the fiscal period falls on Tuesday. Gatesville Co. would record an adjusting entry for the wages worked as follows:

a) Wages Expense $2,400

Cash $2,400

b) Wages Expense $2,400

Wages Payable $2,400

c) Wages Expense $6,000

Cash $6,000

d) Wages Payable $6,000

Cash $6,000

Answer 1

1. A fiscal period is a one-year period that companies and governments use for financial reporting and budgeting. A fiscal period/year is most commonly used for accounting purposes to prepare financial statements. It is a period of time covering a complete accounting cycle, generally consisting of 12 consecutive months.

2. The book value represents the cost of the asset minus the Accumulated Depreciation. The true market value of the asset might be more or less than the book value.

3. Depreciation is the process of allocating the cost of plant assets over their expected useful lives. Adjusting entries for depreciation expense involve increasing (debiting) expenses and increasing (crediting) a special account called Accumulated Depreciation.

4. Additional investments made by an owner may be cash or non-cash items. Itcan increase the owners equity of the business. It is shown as an addition on the Statement of Owner’s Equity.

5. The cost of the office supplies used up during the accounting period should be recorded in the income statement account as Supplies Expense. When supplies are purchased, the amount will be debited to Supplies. At the end of the accounting period, the balance in the account Supplies will be adjusted to be the amount on hand, and the amount of the adjustment will be recorded in Supplies Expense.
Hence, the supplies used is transferred to supplies expense account and supplies will be credited.

Debit Supplies Expense $325

Credit Supplies $325

6. If total revenue exceeded total expenses for the period, the amount of net income will appear in the debit side of the income statement columns.

7. Since the last day of the fiscal period falls on Tuesday, Gatesville Co. has to account for the wages worked for two days, Monday and Tuesday. The adjusting journal entry for the wages worked is:

b) Wages Expense $2,400*

Wages Payable $2,400

Monday Wage $1,200 + Tuesday Wage $1,200 = $2,400*