Accounting ch 3

A reversing entry is?

optional and used to simplify the company's recordkeeping process.

Aurora Corporation operated without insurance coverage for the first month of operations. Then, on February 1, the company paid the $4,800 premium on a two-year insurance policy with benefits beginning on that date. The company uses the accrual basis. How much insurance expense will be reported on the company's income statement for their first year ended December 31?

$2,200

Aurora Corporation operated without insurance coverage for the first month of operations. Then, on February 1, the company paid the $4,800 premium on a two-year insurance policy with benefits beginning on that date. The company uses the cash basis. How much insurance expense will be reported on the company's income statement for their first year ended December 31?

$4,800

The primary difference between the accrual basis and the cash basis of accounting is:

The accrual basis records revenues when services or products are delivered and records expenses when incurred The cash basis records revenuew when cash is received and records expenses when cash is paid

COV ch 3

reverse entry

The revenue recognition principle requires that revenue be recorded:

When the goods or services are provided to customers.

Which of the following statements is true when comparing the results of using reversing entries with not using reversing entries.

Which of the following statements is true when comparing the results of using reversing entries with not using reversing entries.

Place the steps in the four-step closing process in the correct order:

-Close the revenue accounts. -Close the expense accounts. -Close the income summary account. -Close the dividends account.

The accounting cycle consists of 10 steps. Identify the order in which the first five steps will be performed by selecting from the drop down items.

-analyze transactions -journalize -post -prepare adjusted trial balance -adjust accounts

Prepaid expenses reflect transactions when cash is paid:

Before the related expense is recognized.

An unclassified balance sheet:

Broadly groups assets, liabilities and equity

Place the steps in the three-step adjusting process in the correct order:

Determine what the current account balance equals. Determine what the current account balance should equal. Record an adjusting entry to get from step 1 to step 2.

Adjusting entries affect:

One or more balance sheet accounts and one or more income statement accounts.

Before the adjusting entry for a deferral of an expense, the expenses will be _____ and the assets will be _____.

Understated; overstated.

Annual reporting periods can cover:

a calendar year. A 52-week period. 12 consecutive months.

An adjusted trial balance includes which of the following accounts:

all accounts and their balances

Assume that the Accumulated Depreciation account has an unadjusted normal balance of $120,000. The company's list of adjusting entries includes one that debits Depreciation Expense and credits the Accumulated Depreciation account for $20,000. The adjusted balance in the Accumulated Depreciation account is a:

credit balance of $140,000

The company's unclassified balance sheet reported the assets listed in the above table. The total current assets that would be reported on a classified balance sheet prepared for the company are:

cash short-term investments assounts receivable merchandise inventory prepaid expenses

Interim financial statements:

cover less than one year, usually spanning one-, three-, or six-month periods.

The current ratio is computed as:

current assets divided by current liabilities

If a company's net income increased while its net sales remained constant, the company's profit margin would:

increase