Exam 2: Review of the Accounting Process

Cost of goods sold is:

When Castle Corporation pays insurance premiums, the transaction is recorded as a debit to prepaid insurance. Additional information for the year ended December 31 is as follows: What was the total amount cash paid by Castle for insurance premiums during the year?

Fink Insurance collected premiums of $18,000,000 from its customers during the current year. The adjusted balance in the Unearned premiums account increased from $6 million to $8 million dollars during the year. What is Fink's revenue from earned insurance premiums for the current year?

Below is a list of accounts in no particular order. Assume that all accounts have normal balances. Required: In column A, indicate whether a debit will: 1. Increase the account balance, or 2. Decrease the account balance. In column B, classify each account according to the following scheme. For contra accounts, indicate the classification of the account to which it relates. 1. A current asset in the balance sheet. 2. A noncurrent asset in the balance sheet. 3. A current liability in the balance sheet. 4. A long-term liability in the balance sheet. 5. A permanent equity account in the balance sheet. 6. A revenue account in the income statement. 7. An expense account shown in the income statement. 8. Account does not appear in either the balance sheet or the income statement. -Buildings and equipment (B&E)

When the amount of revenue collected in advance decreases during an accounting period:

When converting an income statement from a cash basis to an accrual basis, expenses:

Debits increase asset accounts and decrease liability accounts.

Prepare the closing entries for China Tea Company for the year ended December 31, 2013.

Accrued the interest earned but not collected on notes receivable.

A reversing entry at the beginning of a period for salaries would include a debit to salaries expense.

The payment of cash to a supplier would be recorded in a purchases journal.

Ace Bonding Company purchased merchandise inventory on account. The inventory costs $2,000 and is expected to sell for $3,000. How should Ace record the purchase?

Kline's 2013 net income (or loss):

The accounting equation can be stated as:

The post-closing trial balance contains only permanent accounts.

-Sold inventory on account.

Kline's 12/31/13 total shareholders' equity:

Adjusting journal entries are required to comply with the realization and matching principles.

Owners' equity can be expressed as assets minus liabilities.

Describe what is meant by unearned revenues and give two examples.