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?

1. Only temporary accounts are closed out at the end of the reporting period.
2. Only permanent accounts are closed out at the end of the reporting period.
3. Both permanent and temporary accounts are closed out during the reporting period.
4. None of the above.