Learning Objective 2-3
1) Team Shirts purchased six months' worth of insurance for $900. The insurance would initially be recorded as ________.
A) an account receivable
B) an account payable
C) prepaid insurance
D) insurance expense
2) Team Shirts has $200 in its Prepaid insurance account on June 30. This amount is for insurance for July and August. It represents a ________.
A) current asset
B) long-term asset
C) current liability
D) long-term liability
3) On May 31, Team Shirts pays a $600 dividend to its shareholders. The dividend ________.
A) increases assets by $600
B) reduces retained earnings by $600
C) is classified as dividend expense of $600
D) increases net income by $600
4) On July 1, Team Shirts paid $600 for three months' worth of advertising beginning on July 1. What is the balance in the Prepaid advertising account at July 31?
A) $0
B) $200
C) $400
D) $600
5) On July 1, Team Shirts paid $600 for three months' worth of advertising beginning on July 1. What is the balance in the Prepaid advertising account at August 31?
A) $0
B) $200
C) $400
D) $600
6) On July 1, Team Shirts paid $600 for three months' worth of advertising beginning on July 1. What is Advertising expense for the
MONTH
ended August 31?
A) $0
B) $200
C) $400
D) $600
7) Team Shirts sold $125 worth of T-shirts to a customer on credit. This transaction includes ________.
A) an account receivable
B) an account payable
C) a prepaid sale
D) T-shirt expense
8) On January 1, Team Shirts paid $600 for three months' worth of advertising beginning on February 1. What should the balance be in the Prepaid advertising account on April 1?
A) $0
B) $100
C) $200
D) $300
9) Adjusting the books is done ________.
A) every time a sale is made
B) every time an asset is purchased
C) as expenses are used up
D) at the end of every accounting period
10) The first financial statement to be prepared at the end of each accounting period is the ________.
A) balance sheet
B) income statement
C) statement of changes in shareholders' equity
D) statement of cash flows