Chapter 3 Financial

On February 1, an insurance company receives a premium of $4,000 cash from another company in an agreement to provide insurance of $1,000 each month for the next four months, beginning in February. Think from the insurance company's perspective.

Debit: Deferred Revenue Credit: Service Revenue

On August 1, a bank lends $5,000 to a company at an annual interest of 12% on the borrowed amount. Think from the bank's perspective.

Debit: Interest Receivable Credit: Interest Revenue

On January 1, a company pays one year of rent in advance for $12,000 ($1,000 per month).

Debit: Rent Expense Credit: Prepaid Rent

At the end of May, a company receives a utility bill for $500 associated with operations in May. The company plans to pay the bill on June 10.

Debit: Utilities Expense Credit: Utilities payable

A company provides tutoring services to customers during two weeks in April. Customers pay cash in April.

Debit:no entry required Credit: no entry required

Which financial statement reports revenue and expense accounts?

Income Statement

The balance of which permanent account is affected by closing entries?

Retained Earnings

The closing entry for which of the following accounts will result in an increase in retained earnings?

Revenues

Which of the following is a temporary account?

Salaries Expense

Which of the following provides the balance of retained earnings to be used in a classified balance sheet?

Statement of stockholders' equity

Which of the following is an example of a current asset?

Supplies

Which of the accounts are listed in a post-closing trial balance?

Supplies Retained Earnings Deferred Revenue

Which of the following is an objective for preparing closing entries?

To transfer the balances of temporary accounts to the Retained Earnings account.

In the adjusted trial balance, the balance of the Retained Earnings account is its balance at the end of the accounting period—the balance after all revenue, expense, and dividend transactions.

false

The _____ is the average time between purchasing inventory and receiving cash proceeds from its sale.

operating cycle