Accrual accounting and cash basis accounting

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Reference no: EM13861412

Essay Questions

1. Identify the differences between accrual accounting and cash basis accounting. 

2. How is the profit margin calculated? Discuss its use in analyzing a company's performance. 

3. What is the purpose of closing entries? Describe the closing process. 

Short Answer Questions

1. On December 14 Bench Company received $3,700 cash for consulting services that will be performed in January. Bench records all such prepayments in a liability account. Prepare a general journal entry to record the $3,700 cash receipt. 

2. Complete the following by filling in the blanks:
(1) The Prepaid Insurance account had a $455 debit balance at the beginning of the current year; $650 of insurance premiums were paid during the year; and the year-end balance sheet showed $420 of prepaid insurance; consequently, the income statement for the year must have shown $______________ of insurance expense.

3. Barnes Company has 20 employees who are each paid $80 per day for a 5-day workweek. The employees are paid each Friday. This year the accounting period ends on Tuesday. Prepare the December 31 year-end adjusting journal entry Barnes Company should make to accrue salaries. 

Reference no: EM13861412

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