What Effect Does Recognizing Revenue at the End of the Accounting

question 59

Multiple Choice

What effect does recognizing revenue at the end of the accounting period for rent previously received in advance have on the accounting equation for an insurance company?

• A)Stockholders' equity increases and liabilities increase.
• B)Assets increase and stockholders' equity increases.
• C)Assets decrease and liabilities decrease.
• D)Liabilities decrease and stockholders' equity increases.

---

Definitions:

Contingency Reserves

Funds or resources set aside to cover unexpected costs or losses in a project, program, or portfolio, providing a financial cushion.

Accelerated Depreciation

A method of depreciation that allows for a higher expense deduction in the early years of an asset's life, decreasing its book value more quickly.

Goodwill

Goodwill is an intangible asset that arises when a company acquires another business for a price higher than the fair value of its net tangible assets, representing aspects such as brand reputation and customer loyalty.

Times Interest

A financial ratio that measures a company's ability to meet its interest payments based on current earnings. Often referred to as the interest coverage ratio.