BKAR 1013 FINANCIAL REPORTING 1 (A191)

EXERCISE TOPIC 2 RECORDING PROCESS

1. Adjusting entries are made to ensure that:

A. Expenses are recognized in the period in which they are incurred.
B. Revenues are recorded in the period in which they are earned
C. Statement of financial position and statement of comprehensive income have
correct balances at the end of accounting period
D. All of the above

2. Each of the following is a major type (or category) of adjusting entries except:
A. Prepaid expenses
B. Accrued revenue
C. Accrued expenses
D. Earned revenues

3. The trial balance show Supplies RM1,350 and Supplies expense RM0. If RM600
supplies are on hand at the end of the period, the adjusting entry is:
A. Supplies 600
Supplies Expense 600
B. Supplies 750
Supplies Expense 750
C. Supplies Expense 750
Supplies 750
D. Supplies Expenses 750
Supplies 600

4. Adjustments for prepaid expenses:

A. Decrease assets and increase revenues
B. Decrease expenses and increase assets
C. Decrease assets and increase expenses
D. Decrease revenues and increase assets

5. The Unearned Revenue account was not adjusted for work performed in the
current period. What is the effect of this error?
A. The assets will be understated and expenses will be understated.
B. The assets will be overstated and liabilities will be overstated.
C. The liabilities will be overstated and revenues will be understated.
D. The liabilities will be understated and revenues will be understated.

6. AG Enterprises paid RM105,000 for office furniture. The furniture is depreciated

using the straight-line method and has an estimated service life of 7 years. After
three years of use, the book value of the furniture will be:
A. RM45,000.

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 B. RM60,000.
C. RM90,000.
D. RM105,000.

7. Which of the following are in accordance with generally accepted accounting

principles?
A. Accrual basis accounting
B. Cash basis accounting
C. Both accrual basis and cash basis accounting
D. Neither accrual basis nor cash basis accounting

8. The Accounts Receivable account has a RM20,000 debit balance in the unadjusted
trial balance. There is a RM1,000 debit adjustment to Accounts Receivable. The
adjusted trial balance will show Accounts Receivable as a:
A. RM19,000 debit balance.
B. RM21,000 credit balance.
C. RM21,000 debit balance.
D. RM19,000 credit balance.

9. Pedro Torreh & Partners purchased machineries by paying cash of RM24,000 and
issuing a note payable of RM36,000. Which of the following journal entries would
be recorded?

A. Cash is credited for RM24,000; Equipment is credited for RM60,000; and

Notes payable is debited for RM36,000.
B. Cash is credited for RM24,000; Equipment is credited for RM36,000; and
Notes payable is debited for RM12,000.
C. Cash is debited for RM24,000; Equipment is debited for RM36,000; and
Notes payable is credited for RM60,000.
D. Cash is credited for RM24,000; Equipment is debited for RM60,000; and
Notes payable is credited for RM36,000.

10. If a resource has been consumed but a bill has not been received at the end of the
accounting period, then
A. an expense should be recorded when the bill is received.
B. an expense should be recorded when the cash is paid out.
C. an adjusting entry should be made recognizing the expense.
D. it is optional whether to record the expense before the bill is received.
11. Which of the following accounts is not a commonly adjusted in an adjusting entry?
A. cash - adjusted to match the bank statement
B. office supplies - adjusted to record supplies used during the period
C. prepaid rent - adjusted to record rent expense
D. equipment - adjusted to record depreciation

12. Annual equipment depreciation is calculated as RM5,000. What is the adjusting

journal entry?
A. debit equipment and credit depreciation expense for RM5,000

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 B. debit depreciation expense and credit accumulated depreciation for
RM5,000
C. debit accumulated depreciation and credit equipment for RM5,000
D. debit accumulated depreciation and credit depreciation expense for
RM5,000

13. Employees are paid every two weeks. On December 31, employees are owed
RM2,500 in salaries since the last payday on December 22. What is the adjusting
journal entry?
A. debit cash and credit salaries expense
B. debit salaries expense and credit cash
C. debit salaries payable and credit salaries expense
D. debit salaries expense and credit salaries payable

14. Which is correct concerning the adjusted trial balance

A. An adjusted trial balance lists all ledger account balances separated by assets
and liabilities.
B. An adjusted trial balance is a method used to prove the accounting to date
has been posted properly.
C. An adjusted trial balance is prepared after adjusting entries have been
journalized and posted.
D. The balance sheet accounts in the adjusted trial balance have the proper
financial statement amounts.

15. Which of the following is not an adjusting entry?

A. The supplies used during the period.
B. The cash payment on a note from the bank.
C. The depreciation of equipment.
D. The salaries owed but not yet paid

16. A journal entry contains a debit to a liability account and a credit to a revenue
account. This is an example of a(n):
A. accrued expense.
B. deferred expense.
C. unearned revenue.
D. accrued revenue.

17. Which of the following accounts is a closing entry?

A. Accounts receivable is closed to reflect the amounts paid during the year.
B. Salary expense is closed to reflect the salaries owed but not yet paid
C. Revenues are closed to allow an accurate account of annual revenue
D. equity is closed to reflect the withdrawals during the year

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18. The entry to close Income Summary
A. depends on the total amount of revenues and total amount of expenses.
B. is always a debit to Income Summary and a credit to Owner's Equity.
C. is always a debit to Owner's Equity and a credit to Income Summary.
D. never occurs.

19. Permanent accounts include:

A. cash, service revenue and land.
B. cash, prepaid expenses and unearned revenue.
C. cash, land and salaries expense.
D. service revenue, salaries expense and utilities expense.

20. A post-closing trial balance

A. only reflects the Statement of Financial Position.
B. only reflects the changes during the year.
C. shows every account has a zero balance
D. does not show total debits equal total credits.

21. What is the correct way to close withdrawals?

A. Debit withdrawals and credit Owner's equity
B. Debit Owner's equity and credit withdrawals
C. Debit withdrawals and credit Income Summary
D. Debit Income Summary and credit withdrawals

22. Which of the following statements is associated with the accrual basis of
accounting?
A. The timing of cash receipts and disbursements is emphasized.
B. A minimum amount of record keeping is required.
C. This method is used less frequently by businesses than the cash method of
accounting.
D. Revenues are recognized in the period they are earned, regardless of the time
period the cash is received.

23. Statements best describes the purpose of closing entries?

A. To faciliate posting and taking a trial balance.
B. To determine the amount of net income or net loss for the period.
C. To reduce the balances of revenue and expense accounts to zero so that they
may be used to accumulate the revenues and expenses of the next period.
D. To complete the record of various transactions that were started in a prior
period

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24. A tired accountant failed to record the adjusting entry for accrued salaries. How
does this error affect net income?

A. The assets for the period will be understated.

B. The net income for the period will be understated.
C. The net income for the period will be overstated.
D. The net income for the period will not be affected

QUESTION 25

Ain Management services opens for business and completes these transactions in
August 2019:
August 1 Ain, the owner, invests RM28,000 cash along with office equipment
valued as RM25,000 in the business
2 Prepaid RM10,500 cash for twelve months’ rent for office space
4 Made credit purchases for RM9,000 in office equipment and RM1,200
in office supplies. Payment is due within 10 days.
8 Completed work for a client and immediately received RM2,600 cash
12 Completed a RM13,400 project for a client, who must pay within 20
days
13 Paid RM10,200 cash to settle the account payable created on 4 August
19 Paid RM5,200 cash for the premium on an 18-month insurance policy
22 Received RM7,800 cash as partial payment for the work completed on
12 August.
24 Completed work for another client for RM1,900 on credit.
28 Ain withdrew RM5,300 cash for personal use.
29 Purchased RM1,700 of additional office supplies on credit.
31 Paid RM460 cash for this month’s utility bill

REQUIRED:
1. Prepare journal entries to record these transactions.
2. Post journal entries to three column ledger.
3. Prepare a trial balance as at 31 August 2019.

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QUESTION 26

Syarikat Bernama is a small company operated by

Ikhwan three years ago. At July 31, 2019, the trial
balance of Syarikat Bernama is as follows:

Cash 3,425
Acc Receivables 7,000
Supplies 1,270
Prepaid Insurance 620
Office Equipment 51,650
Accumulated Depreciation 9,700
Accounts Payable 925
Unearned Fees 1,250
Ikhwan, Capital 29,000
Ikhwan, Withdrawals 5,200
Fees Earned 59,125
Wages Expense 22,415
Rent Expense 4,200
Utilities Expense 2,715
Miscellaneous Expense 1,505
100,000 100,000

The data needed to determine year-end adjustments are as

follows:
a. Supplies on hand at July 31, 2019, RM380.
b. Insurance premiums expired during the year, RM315.
c. Depreciation of equipment during the year, RM4,950
d. Wages accrued but not paid at July 31, 2019, RM440.
e. Accrued fees earned but not recorded at July 31, 2019,
RM1,000.
f. Unearned fees on July 31, 2019, RM750.

REQUIRED:

1. Journalize the adjusting entries.

2. Prepare the income statement, a statement of owner equity
and balance sheet.
3. Journalize the closing entries.
4. Prepare a post closing trial balance.