21.An adjusting entry often includes an entry to Cash.
22.Before an adjusting entry is made to recognize the cost of expired insurance for the period, Prepaid Insurance and Insurance Expense are both overstated.
23.Before an adjusting entry is made to accrue employee salaries, Salaries Expense and Salaries Payable are both understated.
24.Failure to record depreciation expense will overstate assets and understate expenses.
25.Profit margin can also be called return on sales.
26.Profit margin reflects the percent of profit in each dollar of revenue.
27.Torsten had total assets of $149,501,000, net income of $6,242,000, and net sales of $209,203,000. Its profit margin was 2.98%.
Profit Margin = Net Income/Net Sales
Profit Margin = $6,242,000/$209,203,000 = 2.98%
28.A contra account is an account linked with another account; it is added to that account to show the proper amount for the item recorded in the associated account.
29.If a company reporting on a calendar year basis, paid $18,000 cash on January 1 for one year of rent in advance and adjusting entries are made at the end of each month, the balance remaining in Prepaid Rent on December 1 should be $1,500.
$18,000 * 1/12 = $1,500
30.Accumulated depreciation is shown on the balance sheet as a subtraction from the cost of its related asset.