What is the effect on the accounting equation

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Reference no: EM131266450

1. Cole Inc., a new company, purchases a two-year insurance policy for $12,000. Six months later, the correct balance in the prepaid insurance account would be _______________.

$12,000

$6,000

$9,000

None of the above

2. Which of the following is not an advantage of the corporate form of organization?

continuous existence of the entity

limited liability of stockholders

government regulation

easy transfer of ownership

3. When the stockholders invest cash in the business, what is the effect on the accounting equation?

Liabilities increase and stockholders' equity increases.

Both assets and liabilities increase.

Both assets and stockholders' equity increase.

None of the above

4. The ending balance in retained earnings is shown in the _______________.

income statement

statement of retained earnings

balance sheet

both (b) and (c)

both (a) and (c)

(a), (b), and (c)

Reference no: EM131266450

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