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Problem 1. Use the following information as of December 31 to determine equity.
Liabilities $141,000
Cash $57,000
Equipment $206,000
Buildings $175,000
-$ 57,000
-$141,000
-$297,000
-$438,000
Problem 2: A company shows a $600 balance in Prepaid Insurance in the Unadjusted Trial Balance columns of the work sheet. The Adjustments columns show expired insurance of $200. This adjusting entry results in:
-$200 less in net income.
-$200 more in net income.
-$200 difference between the debit and credit columns of the Unadjusted Trial Balance.
-$200 of prepaid insurance.
Problem 3: On April 1, 2007, a company paid the $1,350 premium on a three-year insurance policy with benefits beginning on that date. What will be the insurance expense on the annual income statement for the year ended December 31, 2007?
-$1,350
-$450
-$1,012.50
-$337.50
Problem 4: The accrual basis of accounting:
-is generally accepted for external reporting because it is more useful for most business decisions.
-is flawed because it gives complete information about cash flows.
-recognizes revenues when received in cash.
-recognizes expenses when paid in cash.
Problem 5: Two common subgroups for liabilities on a classified balance sheet are:
-current liabilities and intangible liabilities.
-present liabilities and operating liabilities.
-general liabilities and specific liabilities.
-current liabilities and long-term liabilities.
Problem 6: Prior to recording adjusting entries, the Office Supplies account had a $359 debit balance. A physical count of the supplies showed $105 of unused supplies available. The required adjusting entry is:
-debit Office Supplies $105 and credit Office Supplies Expense $105.
-debit Office Supplies Expense $105 and credit Office Supplies $105.
-debit Office Supplies Expense $254 and credit Office Supplies $254.
-debit Office Supplies $254 and credit Office Supplies Expense $254.