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Exam 2: Review of the Accounting Process

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Question 1

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When converting an income statement from a cash basis to an accrual basis, expenses:

A) Exceed cash payments to suppliers.
B) Equal cash payments to suppliers.
C) Are less than cash payments to suppliers.
D) May exceed or be less than cash payments to suppliers.

E) None of the above
F) All of the above

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Question 2

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Describe what is meant by unearned revenues and give two examples.

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Unearned revenues are created when a com...

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Question 3

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Cost of goods sold is:

Prepare the closing entries for China Tea Company for the year ended December 31, 2013.

Below is a list of accounts in no particular order. Assume that all accounts have normal balances. Required: In column A, indicate whether a debit will: 1. Increase the account balance, or 2. Decrease the account balance. In column B, classify each account according to the following scheme. For contra accounts, indicate the classification of the account to which it relates. 1. A current asset in the balance sheet. 2. A noncurrent asset in the balance sheet. 3. A current liability in the balance sheet. 4. A long-term liability in the balance sheet. 5. A permanent equity account in the balance sheet. 6. A revenue account in the income statement. 7. An expense account shown in the income statement. 8. Account does not appear in either the balance sheet or the income statement. -Buildings and equipment (B&E)

When Castle Corporation pays insurance premiums, the transaction is recorded as a debit to prepaid insurance. Additional information for the year ended December 31 is as follows: What was the total amount cash paid by Castle for insurance premiums during the year?

Debits increase asset accounts and decrease liability accounts.

Ace Bonding Company purchased merchandise inventory on account. The inventory costs $2,000 and is expected to sell for $3,000. How should Ace record the purchase?

Adjusting journal entries are required to comply with the realization and matching principles.

The accounting equation can be stated as:

Kline's 12/31/13 total shareholders' equity:

Kline's 2013 net income (or loss):

-Sold inventory on account.

The post-closing trial balance contains only permanent accounts.

A reversing entry at the beginning of a period for salaries would include a debit to salaries expense.

Owners' equity can be expressed as assets minus liabilities.

Fink Insurance collected premiums of $18,000,000 from its customers during the current year. The adjusted balance in the Unearned premiums account increased from $6 million to $8 million dollars during the year. What is Fink's revenue from earned insurance premiums for the current year?

When the amount of revenue collected in advance decreases during an accounting period:

The payment of cash to a supplier would be recorded in a purchases journal.

Accrued the interest earned but not collected on notes receivable.