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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.