Financial Accounting: Multiple Adjusting Entries

1. If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees, the end-of-period adjusting entry to record the portion of those fees that has been earned is:

A. Debit Cash and credit Legal Fees Earned.

B. Debit Cash and credit Unearned Legal Fees.

C. Debit Unearned Legal Fees and credit Legal Fees Earned.

D. Debit Legal Fees Earned and credit Unearned Legal Fees.

E. Debit Unearned Legal Fees and credit Accounts Receivable.

2. Zed Bennett opened an art gallery and as a dealer completed these transactions:
(1.) Started the gallery, Artery, by investing $40,000 cash and equipment valued at $18,000.
(2.) Purchased $70 of office supplies on credit.
(3.) Paid $1,200 cash for the receptionist's salary.
(4.) Sold a painting for an artist and collected a $4,500 cash commission on the sale.
(5.) Completed an art appraisal and billed the client $200.
What was the balance of the cash account after these transactions were posted?

A. $12,230.

B. $12,430.

C. $43,300.

D. $43,430.

E. $61,430.

3. Zion Company has assets of $600,000, liabilities of $250,000, and equity of $350,000. It buys office equipment on credit for $75,000. The effect of this transaction include:

A. Assets increase by $75,000 and expenses increase by $75,000.

B. Assets increase by $75,000 and expenses decrease by $75,000.

C. Liabilities increase by $75,000 and expenses decrease by $75,000.

D. Assets decrease by $75,000 and expenses decrease by $75,000.

E. Assets increase by $75,000 and liabilities increase by $75,000.

4. On January 1 a company purchased a five-year insurance policy for $1,800 with coverage starting immediately. If the purchase was recorded in the Prepaid Insurance account, and the company records adjustments only at year-end, the adjusting entry at the end of the first year is:
A. Debit Prepaid Insurance, $1,800; credit Cash, $1,800.

B. Debit Prepaid Insurance, $1,440; credit Insurance Expense, $1,440.

C. Debit Prepaid Insurance, $360; credit Insurance Expense, $360.

D. Debit Insurance Expense, $360; credit Prepaid Insurance, $360.

E. Debit Insurance Expense, $360; credit Prepaid Insurance, $1,440.

5. Photometer Company paid off $30,000 of its accounts payable in cash. What would be the effects of this transaction on the accounting equation?
A. Assets, $30,000 increase; liabilities, no effect; equity, $30,000 increase.

B. Assets, $30,000 decrease; liabilities, $30,000 decrease; equity, no effect.

C. Assets, $30,000 decrease; liabilities, $30,000 increase; equity, no effect.

D. Assets, no effect; liabilities, $30,000 decrease; equity, $30,000 increase.

E. Assets, $30,000 decrease; liabilities, no effect; equity $30,000 decrease.