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On December 1, a company pays $3,600 for a 36-month insurance policy. After one month, accrual accounting requires (100/3,600) of insurance expense be reported on the income statement ending December 31. However, if cash basis accounting is used, (100/3,600) of insurance expense would be reported at the time of purchase.

Blank 1: 100 Blank 2: 3,600

A 12-month insurance policy was purchased on Dec. 1 for $3,600 and the Prepaid insurance account was increased for the payment. Demonstrate the required adjusting journal entry on Dec. 31 by selecting from the choices below.

Insurance expense would be debited for $300.

A plant asset can be defined by which of the following statements? (Check all that apply.)

It is a tangible long-term asset. It has a life within the business greater than one year or the current operating cycle, whichever is longer. It is reported on the balance sheet. Its original cost (minus any salvage value) is expensed over its useful life.

Which of the following statements describes the expense recognition (matching) principle? (Check all that apply.)

Matching of expenses with revenues is a major part of the adjusting process. Expenses should be matched in the same accounting period as the revenues that are recognized as a result of those expenses.

Which of the following accounts is considered a prepaid expense?

Supplies

$1,000 of supplies were purchased at the beginning of the month. $300 were used during the month. (The Supplies account was increased at the time of the initial purchase.) Demonstrate the required adjusting journal entry by selecting from the choices below. (Check all that apply.)

Supplies expense would be debited for $300. Supplies would be credited for $300.

$800 of supplies were purchased at the beginning of the month and the Supplies account was increased. As of the end of the period, $200 of supplies still remain. Which of the following is the correct adjusting entry?

Supplies expense would be debited for $600.

In preparing a post-closing trial balance, which of the following statements are correct? (Check all that apply.)

The total of all debit balances will equal the total of all credit balances. The retained earnings account on the post-closing trial balance will include the net income or net loss for the period. All permanent accounts with a balance in the general ledger will be included.

Accrual basis accounting is defined as: (Check all that apply.)

an accounting system which is consistent with generally accepted accounting principles. an accounting system that uses the matching principle to determine when to recognize revenues and expenses. an accounting system that uses the adjusting process to recognize revenues when earned and expenses when incurred.