1. Yellow Co. makes a sale to a customer in January but does not receive payment until March. Yellow Co. records the sale in January. Which method of accounting is Yellow Co. using?

a) accrual basis of accounting

b) cash basis of accounting

c) hybrid basis of accounting

d) consolidated basis of accounting

2. A net loss always increases liabilities.

True

False

3. The adjusted balances for Windsor Co. are listed below.

Cash, $10,000 Accounts Receivable, $1,250 Prepaid Insurance, $1,750 Equipment, $7,500 Accumulated Depreciation, $1,000 Accounts Payable, $2,000 T. Windsor, Capital, $15,000 J. Windsor, Drawing, $5,000 Income from Services, $17,500 Wages Expense, $6,000 Rent Expense, $4,000

After recording the closing entries, what would be the balance of the capital account?

a) $12,500

b) $10,000

c) $35,000

d) $17,500

4. If a business has a net loss for a fiscal period, the journal entry to close the Income Summary account is a debit to Income Summary and a credit to Capital.

False

True