Chapter 3—The Adjusting Process

MULTIPLE CHOICE
36.The supplies account has a balance of $1,200 at the beginning of the year and was debited during the year for
$2,300, representing the total of supplies purchased during the year. If $650 of supplies are on hand at the
end of the year, the supplies expense to be reported on the income statement for the year is
a $650
.
b $1,750
.
c $4,150
.
d $2,850
.
ANS: D PTS: 1 DIF: Moderate OBJ: 03-02
NAT: AACSB Analytic | AICPA FN-Measurement | ACBSP-APC-07-Adjusting Entries

37. A company purchases a one-year insurance policy on June 1 for $1,260. The adjusting entry on
December 31 is
a debit Insurance Expense, $630 and credit Prepaid Insurance, $630.
.
b debit Insurance Expense, $525 and credit Prepaid Insurance, $525.
.
c debit Insurance Expense, $735, and credit Prepaid Insurance, $735.
.
d debit Prepaid Insurance, $630, and credit Cash, $630.
.
ANS: C PTS: 1 DIF: Difficult OBJ: 03-02
NAT: AACSB Analytic | AICPA FN-Measurement | ACBSP-APC-07-Adjusting Entries

38. Austin, Inc. made a Prepaid Rent payment of $2,800 on January 1st. The company’s monthly rent is
$700. The amount of Prepaid Rent that would appear on the January 31 balance sheet after adjustment is:
a $2,100
.
b $700
.
c $3,500
.
d $1,400
.
ANS: A PTS: 1 DIF: Moderate OBJ: 03-02
NAT: AACSB Analytic | AICPA FN-Measurement | ACBSP-APC-07-Adjusting Entries

39. Depreciation Expense and Accumulated Depreciation are classified, respectively, as

a expense, contra asset
.
b asset, contra liability
.
 c revenue, asset
.
d contra asset, expense
.
ANS: A PTS: 1 DIF: Easy OBJ: 03-02
NAT: AACSB Analytic | AICPA FN-Measurement

40. The type of account and normal balance of Accumulated Depreciation is

a asset, credit
.
b asset, debit
.
c contra asset, credit
.
d contra asset, debit
.
ANS: C PTS: 1 DIF: Easy OBJ: 03-02
NAT: AACSB Analytic | AICPA FN-Measurement