Question

1.)The net income will cause a change in which component of stockholders' equity? Accumulated Other Comprehensive Income Paid-in Capital Retained Earnings Common Stock 2).What are the three main financial reports used in managing a business? Balance Sheet, Profit and Loss, Statement of Cash Flows Balance Sheet, Profit and Loss, Accounts Payable Aging Profit & Loss, Accounts Payable Aging, Accounts Receivable Aging Balance Sheet, Profit & Loss, Budget vs Actual 3).ABC Company Inc. operates on accrual basis accounting. In June 2023, they paid $5,000 to have a booth at an industry conference in December 2023 to attract the attention of potential customers. How should this expense be handled with the June close? Recognized fully in June, as a Conference Expense Recognized evenly over the months of June-December, as a Conference Expense, with the Prepaid Expense account holding the interim balance. Recorded to Prepaid Expense fully in June, with the full balance being released in December as a Conference Expense. Recognized fully in June, as a Sales & Marketing Expense

Answer 1

The expense should be recognized evenly over the months of June to December as a
Conference Expense. This means that each month, $833.33 (5000/6) would be recognized as an expense related to the conference. The Prepaid Expense account would be used to hold the interim balance until the conference takes place in December.
So, in June, you would record an expense of $833.33 and debit the Conference Expense account and credit the Prepaid Expense account. In July, you would repeat the same entry, reducing the Prepaid Expense account balance by $833.33, and so on until December when the full $5,000 has been recognized as a Conference Expense and the Prepaid Expense account balance is zero.
This approach ensures that the expense is matched with the period it relates to, following the accrual basis of accounting.