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1 a prepaid expense recorded initially as an expense is adjusted by crediting the as 4300822

 

1) A prepaid expense recorded initially as an expense is adjusted by crediting the asset account.

 

2) When a prepaid expense is recorded initially as an expense, the adjusting entry transfers the unused portion of the expense to the asset account.

 

3) A liability account is credited when a prepaid expense is recorded initially as an expense.

 

4) When a prepaid expense is initially recorded as an expense, the adjusting entry:

A) transfers the used portion to an asset account.

B) transfers the unused portion to an asset account.

C) transfers the used portion to an expense account.

D) there is no need for an adjusting entry.

5) Lynnwood Services prepaid 24 months of rent in advance on October 1, 2014. Lynnwood Services debited rent expense for the entire amount of $12,000. The adjusting entry on December 31, 2014, would include a:

A) debit to prepaid rent for $1,500.

B) debit to prepaid rent for $10,500.

C) credit to rent expense for $1,500.

D) debit to rent expense for $10,500.

 

6) Lynnwood Services prepaid six months of insurance in advance on July 1, 2014. Lynnwood Services debited insurance expense for the entire amount of $12,000. The adjusting entry on December 31, 2014, would include:

A) a debit to prepaid insurance for $6,000.

B) a debit to prepaid insurance for $12,000.

C) a credit to insurance expense for $12,000.

D) No adjustment is necessary on December 31, 2014.

 

7) When a prepaid expense is initially recorded as an expense, the adjusting entry would include a:

A) debit to a contra account.

B) debit to a prepaid expense account.

C) debit to an unearned expense account.

D) debit to an unearned revenue account.

 

8) When a prepaid expense is initially recorded as an expense, the adjusting entry has the following effect on net income:

A) no effect.

B) decrease.

C) increase.

D) current income is correct but next period's income is incorrect.

9) The balance in the Office Supplies account had a debit balance on January 1, 2013, that equalled the $240 of supplies on hand. During the year, the company purchased $4,200 of supplies that were debited to the Office Supplies Expense account. The proprietor estimates that the cost of supplies remaining on hand on December 31 is $960. What is the required adjusting journal entry on December 31?

A)

Dr. Office Supplies Expense

3,480

    Cr. Office Supplies

      3,480

 

B)

Dr. Office Supplies Expense

960

    Cr. Office Supplies

      960

 

C)

Dr. Office Supplies

3,480

    Cr. Office Supplies Expense

      3,480

 

D)

Dr. Office Supplies

720

    Cr. Office Supplies Expense

      720

 

For each of the items or entries described, indicate with a code letter, provided below, the effect of the transaction or the correction of the error described on the corrected net income:

 

Net income would increase I

Net income would decrease D

No effect on net income N/E

 

A) I

B) D

C) N/E

 

10) Prepaid rent was originally recorded to rent expense and no adjustment has yet been made.

 

 

 

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