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Accounting Fundamental Principles

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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




Question 2

1. 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.

Question 3

1. 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?





Question 4

1. 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.

Question 5

1. 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.

Question 7

1. 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.

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Solution Summary

Accounting fundamental principles are examined.