BUS103: Introduction to Financial Accounting

1. True. Every adjusting entry involves either moving previously recorded data from an asset account to an expense account or from a liability account to a revenue account (or in the opposite direction) or simultaneously entering new data in an asset account and a revenue account or in a liability account and an expense account.
   
   
2. True. A fiscal year is any 12 consecutive months, so all calendar years are also fiscal years. A calendar year, however, must end on December 31, so it does not include fiscal years that end on any date other than December 31 (such as June 30).
   
   
3. False. The accumulated depreciation account is a contra asset that shows the total of all depreciation recorded on an asset from its acquisition date up through the balance sheet date.
   
   
4. False. The Unearned Delivery Fees account is a liability. As the fees are earned, the amount in that account is transferred to a revenue account.
   
   
5. True. If an adjusting entry is overlooked and not made, at least one income statement account and one balance sheet account will be incorrect.

1. d. One-third of the benefits have expired. Therefore, USD 400 must be moved from the asset (credit) to an expense (debit).

2. a. USD 1,100 of the supplies have been used, so that amount must be moved from the asset (credit) to an expense (debit).

3. c. The amount of annual depreciation is determined as (USD 20,000 – USD 5,000) divided by 5 = USD 3,000. The debit is to Depreciation Expense – Trucks, and the credit is to Accumulated Depreciation – Trucks, a contra asset account.

4. b. Each month USD 2,000 would be transferred from the liability account (debit), Unearned Subscription Fees, to a revenue account (credit).

5. b. An asset, Interest Receivable, is debited, and Interest Revenue is credited.

6. a. The debit would be to Salaries Expense, and the credit would be to Salaries Payable.