ACCT 284 Chapter 4

1. Advance payments for services are called:

a. Unrecorded Revenues
b. Unrecorded Expenses
c. Prepaid Expenses
d. Unearned Revenues

2. The adjusting entry required to record depreciation on a building for the fiscal period
consists of:

a. Debit: Depreciation Expense; Credit: Building

b. Debit: Depreciation Expense; Credit: Accumulated Depreciation
c. Debit: Accumulated Depreciation; Credit: Depreciation Expense
d. Debit: Building; Credit: Depreciation

3. Caldwell Rentals receives rent for January 2002 from a tenant in December 2001. This
payment will be:

a. A 2001 Revenue c. A 2001 Expense

b. A 2002 Expense d. A 2001 Liability

4. Rental Services, Inc. (RSI) pays $5,700 for three years' rent on its Office Building on
August 1, 2001. The entry to record this transaction involves which of the following
account titles and classifications?

a. Debit: Prepaid Rent, Asset; Credit: Cash, Asset

b. Debit: Cash, Asset; Credit: Unearned Rent, Asset
c. Debit: Rent Expense, Expense; Credit: Cash, Asset
d. Debit: Unearned Rent, Asset; Credit: Cash, Asset

5. Rental Services, Inc. (RSI) pays $7,500 for four years' rent on its Office Building on
August 1, 2001. The adjusting entry required at December 31, 2001 is:

a. Debit: Prepaid Rent; Credit: Cash

b. Debit: Rent Expense; Credit: Unearned Rent
c. Debit: Rent Expense; Credit: Prepaid Rent
d. Debit: Unearned Rent; Credit: Cash

6. Rental Services, Inc. (RSI) pays $10,800 for three years' rent on its Office Building on
August 1, 2001.The dollar amount of the adjusting entry required at December 31, 2001
and 2002 is:

a. December 21, 2001: $1,500; December 31, 2002: $3,600

b. December 21, 2001: $1,800; December 31, 2002: $1,800
c. December 21, 2001: $1,800; December 31, 2002: $3,600
d. December 21, 2001: $3,600; December 31, 2002: $3,600

Supplemental Instruction
ACCT 284 Chapter 4

7. Karl Company, a Sole Proprietorship, signed a two-year rental agreement on October

1, 2001, for $9,600. The agreement covers its building for the next two years. Karl
debited Prepaid Rent to record the payment. The December 31, 2001 adjusting entry
includes a credit to:

a. Rent Expense of $1,200

b. Rent Expense of $8,400
c. Prepaid Rent of $1,200
d. Prepaid Rent of $8,400

8. At the beginning of the year, the Unearned Rent account has a balance of $30,000. The
Unearned Rent account balance at the end of the year is $6,000. Given this information,
Rent Revenue for the current year must be:

a. $30,000
b. $24,000
c. $12,000
d. $ 6,000

9. The asset account, Supplies, has a balance of $1,950 at the beginning of the year and
was debited during the year for $5,600, representing the total of supplies purchased
during the year. If $1,500 of supplies is on hand at the end of the year, Supplies
Expense reported on the income statement for the year is:

a. $1,500
b. $1,900
c. $5,600
d. $6,050

10. At the beginning of the period, Stenger, Inc. had $3,600 in the asset account, Supplies.
During the period, it purchased $1,400 of additional items, debiting the Supplies asset
account. At the end of the period, Stenger determined that only $1,200 of supplies were
still on hand. What adjusting entry should Stenger, Inc. make at the end of the period?

a. Debit: Supplies .......................... 1,200

Credit: Supplies Expense ................ 1,200
b. Debit: Supplies .......................... 3,400
Credit: Supplies Expense ................ 3,400
c. Debit: Supplies Expense .................. 3,800
Credit: Supplies ........................ 3,800
d. Debit: Supplies Expense .................. 1,200
Credit: Supplies ........................ 1,200

Supplemental Instruction
ACCT 284 Chapter 4

11. A company pays rent of $1,800 for three months in advance on November 1, 2000.
Which of the following statements is true for the journal entry prepared on November
1?

a. Rent Expense is debited

b. Prepaid Rent is debited
c. Prepaid Rent is credited
d. Cash is debited

12. Which of the following statements is true about deferred revenues?

a. A liability is increased when cash is collected in advance

b. A liability is decreased when cash is collected in advance
c. A liability is increased when revenue is recognized
d. Revenue is recognized when cash is collected

13. A company sold subscriptions for six months on October 1, 2000. $600 was collected in
advance from customers. Which of the following statements is true about the entry
prepared on October 1?

a. Revenue is credited
b. Cash is credited
c. Unearned Revenue is credited
d. Unearned Revenue is debited

Supplemental Instruction