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)