Reference no: EM132463322
In its first year of operations, Athabasca Corp. earned $51,000 in service revenue. Of that amount, $8,400 was on account and the remainder, $42,600, was collected in cash from customers.
The company incurred various expenses totalling $32,600, of which $29,100 was paid in cash. At year end, $3,500 was still owing on account. In addition, Athabasca prepaid $2,000 for insurance coverage that covered the last half of the first year and the first half of the second year. Athabasca expects to owe $3,000 of income tax when it files its corporate income tax return after year end.
Question 1: Calculate the first year's net income under the accrual basis of accounting.
1- Net income under accrual basis$
Question 2: Calculate the first year's net income under the cash basis of accounting.
2- Net income under cash basis$
Question 3: Which of the following accounts are temporary accounts?
a- all expense accounts
b- all revenue accounts
c- the dividend declared account
d- all of the above
Question 4: Which of the following statements is true regarding closing entries?
- Only temporary accounts are closed out at the end of the reporting period.
- Only permanent accounts are closed out at the end of the reporting period.
- Both permanent and temporary accounts are closed out during the reporting period.
- None of the above.