1. AOL is a web portal and online service provide that is now owned by a sibsidary of Verizon. In the early 1990s, American were attracting subscribers by giving out free trial (i.e. 100, 500, 1000 hours free acess - disks). The costs incurred by this promotion were the following: printing costs, shipping costs, production costs, costs of acquiring qualified prospects (buying customer lists). Are these economic benfits or sacrifices?

a) No. This because will be future economic sacrifices by these costs.

b) No. This is because there is high uncertainity in the future economic benefits generated by these costs.

c) Yes. There are current economic benefits genereated by these costs.

d) Yes. There will be future economic benefits generated by these costs.

2. Which of the following is FALSE about expense?

a) Prepaid rent is recognition of future rent expenses in advance.

b) Expense should be matched with revenues.

c) Expense decreases assets or increases liabilities.

d) Expense is incurred to bring future benefits.

3. Under the definition of an asset to determine which of the following should be reported under the Assets section of the balance sheet?

a) Research and development expense on projects that have high uncertaintiy about whether products can be produced.

b) The portion of prepaid rent for the current period.

c) Salary costs for the current period.

d) Prepaid rent for future periods.

PLEASE EXPLAIN YOUR ANSWERS