Prepaid Insurance Expense – Finance & Accounting
Prepaid Insurance Expense – Finance & Accounting
Assume S Company only prepares AJEs as of December 31, the end of S’s accounting year. On October 1, S paid $9,000 for a 9-month insurance policy and recorded the payment in a temporary account. The AJE S will make on December 31 will include a(an)
$3,000 debit to insurance expense
$3,000 debit to prepaid insurance
$6,000 debit to prepaid insurance – Correct
$3,000 credit to insurance expense
$6,000 credit to prepaid insurance
Acme was incorporated on January 1, 2020 with proceeds from the issuance of $93,000 in stock and from borrowed funds of $40,000. During the first year of operations (2020), Acme’s total revenues were $55,000 and total expenses were $15,000. On December 15, 2020, Acme declared a $5,000 cash dividend, payable to stockholders on January 15, 2021. No additional activities affected Acme’s owners’ equity in 2020. Acme’s liabilities as of December 31, 2020 totaled $60,000. On Acme’s December 31, 2020 balance sheet, total assets should be reported at
$133,000
$188,000 – Correct
$128,000
$183,000
$193,000
Assume S Company only prepares AJEs as of December 31, the end of S’s accounting year. On March 1, S received $12,000 of rent for 12 months in advance and recorded the receipt in a nominal account. The AJE S will make on December 31 will include a(an)
$3,000 credit to unearned rent
$10,000 credit to unearned rent
$2,000 credit to rent revenue
$9,000 debit to rent revenue
$2,000 debit to rent revenue – Correct
Assume S Company only prepares AJEs as of December 31, the end of S’s accounting year. On July 1, S paid $9,000 for a 9-month insurance policy and recorded the payment in a temporary account. The AJE S will make on December 31 will include a(an)
$6,000 debit to prepaid insurance
$6,000 credit to insurance expense
$3,000 debit to prepaid insurance – Correct
$3,000 debit to insurance expense
$6,000 credit to prepaid insurance
The purpose of financial accounting is to provide information primarily for which of the following groups?
the federal government and the internal revenue service
investors and creditors – Correct
investors and stockholders
the internal revenue service and creditors
debtors and creditors
Assume S Company only prepares AJEs as of December 31, the end of S’s accounting year. On October 1, S paid $9,000 for a 9-month insurance policy and recorded the payment in a temporary account. The AJE S will make on December 31 will include a(an)
$3,000 debit to insurance expense
$3,000 debit to prepaid insurance
$6,000 debit to prepaid insurance – Correct
$3,000 credit to insurance expense
$6,000 credit to prepaid insurance
Acme was incorporated on January 1, 2020 with proceeds from the issuance of $93,000 in stock and from borrowed funds of $40,000. During the first year of operations (2020), Acme’s total revenues were $55,000 and total expenses were $15,000. On December 15, 2020, Acme declared a $5,000 cash dividend, payable to stockholders on January 15, 2021. No additional activities affected Acme’s owners’ equity in 2020. Acme’s liabilities as of December 31, 2020 totaled $60,000. On Acme’s December 31, 2020 balance sheet, total assets should be reported at
$133,000
$188,000 – Correct
$128,000
$183,000
$193,000
Which of the following is a nominal (temporary) account?
Accrued wages payable
Interest expense – Correct
Unearned advertising revenue
Retained earnings
Prepaid insurance expense
In preparing its 8/31/12 bank reconciliation, Bing has available the following information:
Balance per books, 8/31/12 = $2,000
Return of customer’s check for insufficient funds, 8/30/12 = $500
Outstanding checks, 8/31/12 = $260
Bank service charges for August = $20
What is Bing’s correct cash balance at August 31, 2012?
$1,500.
$2,480.
$1,480. – Correct
$1,240.
$1,740.
Dow manufactures one product. On 12-31-18, Dow adopted the dollar-value LIFO inventory method. Dow’s ending inventory on 12-31-18 was $300,000 and the 2018 factor (index) was 1.00. Other data follows:
Ending inventory as of 12-31-19 at year-end prices = $309,060; 2019 factor = 1.02
Ending inventory as of 12-31-20 at year-end prices = $309,515; 2020 factor = 1.03
What was Dow’s ending inventory as of 12-31-20?
$303,000
$300,500
$300,515
$300,510 – Correct
$303,000
Assume a company’s 01-01-19 beginning inventory was overstated. During 2019, the company did not detect the beginning inventory error. As of 12-31-19, the company’s:
working capital is overstated.
retained earnings is understated. – Correct
working capital is understated.
ending inventory is overstated.
cost of goods sold is understated.
On 12-31-19, Sam acquired a fixed asset by issuing a $10,000 three-year, zero-interest-bearing note to the asset supplier. The market rate of interest as of 12-31-19 was 4%. Sam will pay off the note on 12-31-22 by making a one-time payment of $10,000. In accounting for this fixed asset purchase, how much interest expense should Sam record for the year ended 12-31-19?
$356
$370
$372
$400
$0 – Correct
Expenditures that extend the useful life of a fixed asset are
capitalized by debiting the cash account.
expensed by crediting an accumulated depreciation account.
capitalized by debiting an accumulated depreciation account. – Correct
expensed as incurred.
capitalized by debiting a fixed asset account.
On May 1, Rex factored $100,000 of accounts receivable with Steady Finance on a without recourse basis. Steady assessed a finance charge of $5,000 of the total accounts receivable and retained $3,000 for possible sales returns. Between May 1 and July 31, Rex’s customers returned merchandise on $2,000 of credit sales within the pool of receivables factored. Steady collected $96,000 of the $100,000 of accounts receivable factored. On August 1, Rex and Steady settled up what Rex owes Steady OR what Steady owes Rex. As a result of both factoring its ARs and settling up with Steady, Rex increased its cash account by:
$92,000
$91,000
$90,000
$95,000
$93,000 – Correct
Are intangible assets of a limited-life and an indefinite-life, respectively, amortized?
no, yes
maybe, maybe
yes, yes
no, no
yes, no – Correct
Costs incurred internally to create intangibles are generally
expensed as incurred. – Correct
capitalized.
expensed only if they have an indefinite life.
capitalized if they have an indefinite life.
expensed only if they have a limited life.
Which of the following words/phrases best describes the concept of depreciation of a fixed asset?
systematic and rational cost allocation – Correct
recognition of change in fair value
capitalization
partial expense recognition
comprehensive
In preparing its 8/31/12 bank reconciliation, Bing has available the following information:
Balance per books, 8/31/12 = $2,000
Return of customer’s check for insufficient funds, 8/30/12 = $500
Outstanding checks, 8/31/12 = $260
Bank service charges for August = $20
What is Bing’s correct cash balance at August 31, 2012?
$1,500.
$2,480.
$1,480. – Correct
$1,240.
$1,740.
Dow manufactures one product. On 12-31-18, Dow adopted the dollar-value LIFO inventory method. Dow’s ending inventory on 12-31-18 was $300,000 and the 2018 factor (index) was 1.00. Other data follows:
Ending inventory as of 12-31-19 at year-end prices = $309,060; 2019 factor = 1.02
Ending inventory as of 12-31-20 at year-end prices = $309,515; 2020 factor = 1.03
What was Dow’s ending inventory as of 12-31-20?
$303,000
$300,500
$300,515
$300,510 – Correct
$303,000
The net assets of a business are equal to
total assets plus total liabilities.
total assets minus total stockholders’ equity.
none of these answer choices are correct. – Correct
current assets minus current liabilities.
The basis for classifying assets as current or noncurrent is conversion to cash within
the accounting cycle or one year, whichever is shorter.
the operating cycle or one year, whichever is shorter.
the operating cycle or one year, whichever is longer. – Correct
the accounting cycle or one year, whichever is longer.
Current assets are presented in the balance sheet in
order of their liquidity. – Correct
descending order of their balances.
ascending order of their balances.
reverse order of their liquidity.
Assume a company’s 01-01-19 beginning inventory was overstated. During 2019, the company did not detect the beginning inventory error. As of 12-31-19, the company’s:
working capital is overstated.
retained earnings is understated. – Correct
working capital is understated.
ending inventory is overstated.
cost of goods sold is understated.
On 12-31-19, Sam acquired a fixed asset by issuing a $10,000 three-year, zero-interest-bearing note to the asset supplier. The market rate of interest as of 12-31-19 was 4%. Sam will pay off the note on 12-31-22 by making a one-time payment of $10,000. In accounting for this fixed asset purchase, how much interest expense should Sam record for the year ended 12-31-19?
$356
$370
$372
$400
$0 – Correct
Expenditures that extend the useful life of a fixed asset are
capitalized by debiting the cash account.
expensed by crediting an accumulated depreciation account.
capitalized by debiting an accumulated depreciation account. – Correct
expensed as incurred.
capitalized by debiting a fixed asset account.
On May 1, Rex factored $100,000 of accounts receivable with Steady Finance on a without recourse basis. Steady assessed a finance charge of $5,000 of the total accounts receivable and retained $3,000 for possible sales returns. Between May 1 and July 31, Rex’s customers returned merchandise on $2,000 of credit sales within the pool of receivables factored. Steady collected $96,000 of the $100,000 of accounts receivable factored. On August 1, Rex and Steady settled up what Rex owes Steady OR what Steady owes Rex. As a result of both factoring its ARs and settling up with Steady, Rex increased its cash account by:
$92,000
$91,000
$90,000
$95,000
$93,000 – Correct