119. A company recorded 2 days of accrued salaries of $1,400 for its employees on January 31.

On
February 9, it paid its employees $7,000 for these accrued salaries and for other salaries earned
through February 9. The January 31 and February 9 journal entries are: 
A. 

B. 

C. 

D. 

E. 

2400
2400
120. If accrued salaries were recorded on December 31 with a credit to Salaries Payable, the entry
to record payment of these wages on the following January 5 would include: 
A. A debit to Cash and a credit to Salaries Payable.
B. A debit to Cash and a credit to Prepaid Salaries.
C. A debit to Salaries Payable and a credit to Cash.
D. A debit to Salaries Payable and a credit to Salaries Expense.
E. No entry would be necessary on January 5.
121. On May 1, Carter Advertising Company received $3,600 from Kaitlyn Breanna for advertising
services to be completed April 30 of the following year. The Cash receipt was recorded as
unearned fees. The adjusting entry for the year ended December 31, Year 2 would include: 
A. a debit to Earned Fees for $3,600.
B. a debit to Unearned Fees for $1,200.
C. a credit to Unearned Fees for $1,200.
D. a debit to Earned Fees for $2,400.
E. a credit Earned Fees for $2,400.
122. The balance in the prepaid insurance account before adjustment at the end of the year is
$4,800, which represents the insurance premiums for four months. The premiums were paid on
November 1. The adjusting entry required on December 31 is: 
A. Debit Insurance Expense, $2,400; credit Prepaid Insurance, $2,400.
B. Debit Prepaid Insurance, $2,400; credit Insurance Expense, $2,400.
C. Debit Insurance Expense, $1,200; credit Prepaid Insurance, $1,200.
D. Debit Prepaid Insurance, $1,200; credit Insurance Expense, $1,200.
E. Debit Cash, $4,800; Credit Prepaid Insurance, $4,800.
123. What is the proper adjusting entry at December 31, the end of the accounting period, if the
balance in the prepaid insurance account is $7,750 before adjustment, and the unexpired amount
per analysis of policies is, $3,250? 
A. Debit Insurance Expense, $3,250; credit Prepaid Insurance, $3,250.
B. Debit Insurance Expense, $4,500; credit Prepaid Insurance, $4,500.
C. Debit Prepaid Insurance, $4,500; credit Insurance Expense, $4,500.
D. Debit Insurance Expense, $7,750; credit Prepaid Insurance, $7,750.
E. Debit Cash, $7,750; Credit Prepaid Insurance, $7,750.
124. On March 31, Phoenix, Inc. paid Melanie Publishing Company $15,480 for a 3-year
subscription for five different magazines. The subscriptions started immediately. What is the
amount of revenue that should be recorded by Melanie Publishing Company for each year of the
subscription assuming Melanie uses a calendar reporting period? 
A. $15,480; $0; $0; $0.
B. $5,160; $5,160; $5,160.
C. $3,870; $5,160; $5,160; $1,290.
D. $0; $0; $0; $15,480.
E. The answer cannot be determined based on the information given.
125. On March 31, Phoenix, Inc. paid Melanie Publishing Company $15,480 for a 3-year
subscription for five different magazines. The subscriptions started immediately. What is the
adjusting entry that should be recorded by Melanie Publishing Company on December 31 of the
first year if the credit to record the collection was made to Unearned Fees? 
A. Debit Unearned Fees, $15,480; credit Fees Earned, $15,480.
B. Debit Unearned Fees, $5,160; credit Fees Earned, $5,160.
C. Debit Unearned Fees, $11,610; credit Fees Earned, $11,610.
D. Debit Unearned Fees, $1,290; credit Fees Earned, $1,290.
E. Debit Unearned Fees, $3,870; credit Fees Earned, $3,870.
126. On March 31, Phoenix, Inc. paid Melanie Publishing Company $15,480 for a 3-year
subscription for five different magazines. The subscriptions started immediately. What amount
should appear in the Prepaid Subscription account for Phoenix Company after adjustments on
December 31 each year assuming Phoenix using a calendar reporting period? 
A. $15,480; $11,610; $6,540; $1,290.
B. $3,870; $5,160; $5,160; $1,290.
C. $5,160; $5,160; $5,160.
D. $11,610; $6,450; $1,290; $0.
E. The answer cannot be determined based on the information given.
127. A company made no adjusting entry for accrued and unpaid employee salaries of $9,000 on
December 31. Which of the following statements is true? 
A. It will have no effect on income.
B. It will overstate assets and liabilities by $9,000.
C. It will understate net income by $9,000.
D. It will understate assets by $9,000.
E. It will understate expenses and overstate net income by $9,000.
128. A company made no adjusting entry for accrued and unpaid employee salaries of $9,000 on
December 31. The entry to record the adjusting entry should have been: 
A. debit Salary Expense, $9,000; credit Cash, $9,000
B. debit Salary Expense, $9,000; credit Fees Earned, $9,000
C. debit Salary Expense, $9,000; credit Prepaid Salary, $9,000
D. debit Salary Expense, $9,000; credit Salaries Payable, $9,000
E. debit Salaries Payable, $9,000; credit Salary Expense
Answer 119
Option E
31-Jan Salaries expense $ 1,400
Salaries payable $ 1,400

9-Feb Salaries payable $ 1,400

Salaries expense $ 5,600
Cash $ 7,000

Salaries accrued will be recorded by debit to the salaries expense and credit to salaries payable account
Payment of $ 7,000 will be debit to salaries payable by $ 1,400 and remaining $ 5,600 to salaries expense.

Answer 120
D. A debit to Salaries Payable and a credit to Salaries Expense.
Payment of accrued salaries will be made by debit to salaries payable being a liability and credit to cash.

Answer 121
E. a credit Earned Fees for $2,400.
Earned fees for 8 months of $ 2,400($ 3,600/12 months * 8 months) will be recognized by credit to the fees earned account an

Answer 122
A. Debit Insurance Expense, $2,400; credit Prepaid Insurance, $2,400.
Insurance expense of 2 months will be recognized by debit to insurance expense of $ 2,400($ 4,800/4 months * 2 months) and

Answer 123
B. Debit Insurance Expense, $4,500; credit Prepaid Insurance, $4,500.
To reduce the balance of prepaid insurance to $ 3,250, prepaid insurance is to be credited with $ 4,500($ 7,750 less $ 3,250) a

Answer 124
C. $3,870; $5,160; $5,160; $1,290.
Monthly income = $ 15,480/36 months = $ 430
First year, income of 9 months will be recognized = 9 months * $ 430 per month = $ 3,870
Second year, income of 12 months will be recognized = 12 months * $ 430 per month = $ 5,160

Third year, income of 12 months will be recognized = 12 months * $ 430 per month = $ 5,160
Fourth year, income of 3 months will be recognized = 3 months * $ 430 per month = $ 1,290

Answer 125
C. Debit Unearned Fees, $11,610; credit Fees Earned, $11,610.
Fees earned will be credited with 9 months fees with $ 11,610 ($ 15,480/36 months * 9 months) in the first year with debit to
Answer 126
D. $11,610; $6,450; $1,290; $0.
Monthly expense = $ 15,480/36 months = $ 430
First year, expense of 9 months will be reduced from prepaid insurance = $ 15,480 less (9 months * $ 430 per month) = $ 11,6
Second year, expense of 12 months will be reduced from prepaid insurance = $ 11,610 less (12 months * $ 430 per month) = $
Third year, expense of 12 months will be reduced from prepaid insurance = $ 6,450 less (12 months * $ 430 per month) = $ 1,2

Fourth year, expense of 3 months will be reduced from prepaid insurance = $ 1,290 less (3 months * $ 430 per month) = $ 0

Answer 127
E. It will understate expenses and overstate net income by $9,000.
Non recognition of expenses will understate the expenses, which inturn will overstate the net income by $ 9,000

Answer 128
D. debit Salary Expense, $9,000; credit Salaries Payable, $9,000
Accrued Salary expense will be debited and salaries payable will be credited with $ 9,000
the fees earned account and debit to unearned fees.

/4 months * 2 months) and credit to prepaid insurance of $ 2,400.

500($ 7,750 less $ 3,250) and insurance expense is to be recognized with $ 4,500.

the first year with debit to unearned fees.

 $ 430 per month) = $ 11,610
nths * $ 430 per month) = $ 6,450
s * $ 430 per month) = $ 1,290

* $ 430 per month) = $ 0

me by $ 9,000