On July 31, $3 600 is paid for a one-year insurance policy. On December 31, the adjusting entry for prepaid insurance would include( ).
A. a debit to Insurance Expense,$3 600
B. a credit to Prepaid Insurance,$3 600
C. a debit to Insurance Expense,$1 500
D. a credit to Prepaid Insurance,$2 100
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Accelerated depreciation methods are used primarily in ( )
A. Income tax returns
B. The financial statements of small businesses
C. The financial statements of publicly owned corporations
D. Companies with computer-based accounting systems
DS Company uses a periodic inventory system and made an error at the end of year I that caused its year I ending inventory to be understated by $6000. What effect does this error have on the company’s financial statement? ( )
A. Net income is understated; assets are understated
B. Net income is understated; assets are overstated
C. Net income is overstated; assets are understated
D. Net income is overstated; assets are overstated
Which of the following financial statements is prepared for a period of time ( ).
A. Balance sheet.
B. Income statement.
C. Statement of stockholders’ equity.
D. Statement of cash flows.
Charging the cost of ordinary repairs to the machinery and equipment asset account during the current year would ( ).
A. overstate net income for the current year
B. Understate shareholder’s equity at the end of the current year
C. Not affect the total liabilities at the end of the current year
D. overstate the total assets at the end of the current year
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