PrimeFlix sells one-year online subscriptions for viewing classic movies. Customers are required to pay for the subscription at the beginning of the subscription period

PrimeFlix sells one-year online subscriptions for viewing classic movies. Customers are required to pay for the subscription at the beginning of the subscription period. On April 1, 2021, total sales of one-year subscriptions are $12,000. What is the adjusted balance of Deferred Revenue on December 31, 2021?

A) $9,000.

B) $3,000.

C) $0.

D) $12,000.

Answer: B

Eve's Apples opened for business on January 1, 2021, and paid for two insurance policies effective that date. The liability policy was $36,000 for 18 months, and the crop damage policy was $12,000 for a two-year term. What was the balance in Eve's Prepaid Insurance account as of December 31, 2021?

A) $9,000.

B) $18,000.

C) $30,000.

D) $48,000.

Answer: B

A list of all accounts and their balances after updating account balances for adjusting entries is referred to as:

A) A trial balance.

B) An adjusted trial balance.

C) A post-closing trial balance.

D) An accounting trial balance.

Answer: B

On July 1, 2021, Charlie Co. paid $18,000 to Rent-An-Office for rent covering 18 months from July 2021

On July 1, 2021, Charlie Co. paid $18,000 to Rent-An-Office for rent covering 18 months from July 2021 through December 2022. What adjusting entry should Charlie Co. record on December 31, 2021?

A) Debit Rent Expense and credit Cash for $18,000.

B) Debit Rent Expense and credit Prepaid Rent for $18,000.

C) Debit Prepaid Rent and credit Rent Expense for $6,000.

D) Debit Rent Expense and credit Prepaid Rent for $6,000.

Answer: D

Adjusting entries:

A) Often include the Cash account.

B) Usually are recorded at the beginning of the accounting period.

C) Always involve at least one income statement account and one balance sheet account.

D) Adjust the balance of revenue and expense accounts to zero.

Answer: C

The adjusting entry required to record accrued expenses includes:

A) A credit to Cash.

B) A debit to an asset.

C) A credit to an asset.

D) A credit to liability.

Answer: D

Making insurance payments in advance is an example of:

A) A prepaid expense transaction.

B) A deferred revenue transaction.

C) An accrued expense transaction.

D) An accrued revenue transaction.

Answer: A

Prepayments occur when:

A) Cash payment (or an obligation to pay cash) occurs before the expense recognition.

B) Sales are delayed pending credit approval.

C) Customers are unable to pay the full amount due when goods are delivered.

D) Cash payment occurs after the expense is incurred and liability is recorded.

Answer: A

Which of the following is true about adjusting entries?

A) Entries are necessary due to the conservatism principle.

B) Entries can be done at the beginning or end of the accounting period.

C) They zero the balance of all income statement accounts.

D) They are a necessary part of accrual-basis accounting.

Answer: D

Examples of adjusting entries could include all of the following except:

A) Recording interest earned on bank account balances.

B) Recording the expiration of prepaid insurance.

C) Recording unpaid taxes.

D) Recording the purchase of office supplies.

Answer: D

Which of the following regarding adjusting entries is correct?

A) Adjusting entries are recorded for all external transactions.

B) Adjusting entries are recorded to make sure all cash inflows and outflows are recorded in the current period.

C) Adjusting entries are needed because we use accrual-basis accounting.

D) After adjusting entries, all temporary accounts should have a balance of zero.

Answer: C

Adjusting entries are primarily needed for:

A) Cash-basis accounting.

B) Accrual-basis accounting.

C) Current value accounting.

D) Manual accounting systems.

Answer: B