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AC 113 UNIT 3 QUIZ 1. Question : A&M Co. provided services of $1,000,000 to clients on account. How does this transaction affect A&M’s accounts? Student Answer: If using the accrual method, increase accounts receivable and cash by $1,000,000 each If using the accrual method, increase accounts receivable and revenues by $1,000,000 each If using the cash method, increase accounts receivable and unearned revenues by $1,000,000 each If using the cash method, increase cash and revenues by $1,000,000 each Question 2. Question : When reconciling net income to net cash flows from operating activities on the statement of cash flows, a decrease in accounts payable would __________. Student Answer: be added back be subtracted be shown in the financing activities section be shown in the investing activities section Question 3. Question : An example of an accrued revenue is __________. Student Answer: interest accrued on a note receivable interest accrued on a note payable unearned revenues salaries owed to employees Question 4. Question : On April 1, Tule Inc. paid $3,600 for an insurance premium on a three-year insurance policy. At the end of December, Tule’s fiscal year end, what should be the balance in the Prepaid Insurance account? Student Answer: $2,700 $3,600 $2,400 $0 Question 5. Question : Unearned revenue is what type of an account? Student Answer: Asset Revenue Stockholders’ equity Liability

AC/113 AC113 AC 113 UNIT 3 QUIZ

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