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Which of the following transactions would cause a decrease in both assets and stockholders

Which of the following transactions would cause a decrease in both assets and stockholders’ equity?

a. Paying insurance premium for the next two years.

b. Purchasing office equipment on account.

c. Paying advertising for the current month.

d. Providing installation services to customers.

 

 

86. When a company issues common stock for cash, what is the effect on the accounting equation for the company?

a. Assets increase and liabilities increase.

b. Assets increase and stockholders’ equity increases.

c. Assets decrease and liabilities decrease.

d. Liabilities decrease and stockholders’ equity increases.

 

 

87. If the liabilities of a company increased by $55,000 during a month and the stockholders’ equity decreased by $21,000 during that same month, did assets increase or decrease and by how much?

a. $34,000 increase.

b. $55,000 increase.

c. $34,000 decrease.

d. $76,000 increase.

 

 

88. Providing services to customers on account would affect the balances reported in which financial statement(s)?

a. Income statement

b. Statement of stockholders’ equity

c. Balance sheet

d. All of the financial statements would be affected

 

 

89. Which of the following transactions would cause an increase in both the assets and liabilities of a company?

a. Paying for the current month’s rent.

b. Pay for inventory purchased 90 days ago.

c. Purchase of a building by issuing a note payable.

e. Services received on account.

 

 

90. When a company pays cash for equipment, what is the effect on the accounting equation for that company?

a. Increase assets and increase liabilities.

b. Decrease assets and decrease liabilities.

c. No change.

d. Increase assets and increase stockholders’ equity.

 

 

91. “Record revenue in the period in which it’s earned” is the definition of which principle in accounting?

a. Trial balance.

b. Debits and credits.

c. Revenue recognition.

d. Accounting equation.

Learning Objective: 02-02

Difficulty: Medium

AACSB: Reflective Thinking

AICPA: BB Critical Thinking

Blooms: Understand

 

 

92. Which of the accounts are decreased on the debit side and increased on the credit side?

a. Liabilities, stockholders’ equity, and revenues.

b. Dividends, liabilities, and assets.

c. Expenses, dividends, and stockholders’ equity.

d. Assets, dividends, and expenses.

 

 

93. Which of the following is true about a “debit”?

I. It is part of the double-entry procedure that keeps the accounting equation in balance.

II. It represents an increase to assets.

III. It represents a decrease to liabilities.

IV. It is on the right side of a T-account.

a. I and II.

b. IV only.

c. I, II, and III.

d. I, II, III, and IV.

 

 

94. Which of the following is true about a “credit”?

I. It is part of the double-entry procedure that keeps the accounting equation in balance.

II. It represents a decrease to assets.

III. It represents an increase to liabilities.

IV. It is on the right side of a T-account.

a. I and II.

b. IV only.

c. I, II, and III.

d. I, II, III, and IV.

Jan 27 2020 View more View Less

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