69) Investments by stockholders have what effect on the accounting equation?
A) Assets increase and liabilities increase.
B) Expenses increase and liabilities increase.
C) Assets increase and revenues increase.
D) Assets increase and stockholders’ equity increases.
70) Which of the following is not possible when recording a transaction?
A) Liabilities increase and assets decrease.
B) Stockholders’ equity increases and assets increase.
C) One asset increases and another asset decreases.
D) Stockholders’ equity decreases and assets decrease.
71) Purchasing office supplies on account will:
A) Not change assets.
B) Increase assets and decrease liabilities.
C) Increase assets and increase liabilities.
D) Increase assets and increase stockholders’ equity.
72) Providing services and receiving cash will:
A) Increase assets and increase stockholders’ equity.
B) Increase assets and increase liabilities.
C) Decrease assets and increase liabilities.
D) Decrease liabilities and increase stockholders’ equity.
73) When a company provides services on account, the accounting equation would be affected as
follows:
A) Assets increase.
B) Revenues increase.
C) Assets increase and liabilities decrease.
D) Assets increase and stockholders’ equity increases.
74) Borrowing cash from the bank would have what effect on the accounting equation?
A) Assets increase and stockholders’ equity increases.
B) Assets increase and liabilities increase.
C) Liabilities increase and stockholders’ equity decreases.
D) Liabilities decrease and stockholders’ equity increases.
75) Paying salaries to employees for the current period would have what effect on the accounting
equation?
A) Liabilities increase and stockholders’ equity decreases.
B) Assets decrease and liabilities decrease.
C) Assets decrease and stockholders’ equity decreases.
D) Liabilities decrease and stockholders’ equity increases.
76) Providing services to customers for cash would have what effect on the accounting equation?
A) Total assets increase; total stockholders’ equity increases.
B) Total assets increase; total liabilities decrease.
C) Total liabilities decrease; total stockholders’ equity increases.
D) Total liabilities increase; total stockholders’ equity decreases.
77) Paying for supplies previously purchased would have what effect on the accounting
equation?
A) Assets decrease and stockholders’ equity decreases.
B) Assets increase and liabilities increase.
C) Liabilities decrease and stockholders’ equity increases.
D) Assets decrease and liabilities decrease.
78) If a company provides services on account, which of the following is true?
A) Expenses increase.
B) Liabilities increase.
C) Stockholders’ equity increases.
D) Assets decrease.
79) When a payment is made on an account payable:
A) Assets and stockholders’ equity decrease.
B) Assets and liabilities decrease.
C) Liabilities and revenues decrease.
D) Assets and expenses decrease.
80) Purchasing office equipment on account has what impact on the accounting equation?
A) Stockholders’ equity decreases and assets increase.
B) Liabilities increase and assets increase.
C) Assets decrease and liabilities decrease.
D) Assets increase and stockholders’ equity increases.
81) Purchasing supplies for cash has what effect on the accounting equation?
A) Increase assets.
B) Decrease stockholders’ equity.
C) Decrease liabilities.
D) No net effect.
82) On January 1, Brad Inc. sold $30,000 in products to a customer on account. Then on January
10, Brad collected the cash on that account. What is the impact on Brad’s accounting equation
from the collection of cash on January 10?
A) No net effect on the accounting equation.
B) Assets increase and liabilities decrease.
C) Assets decrease and liabilities decrease.
D) Assets increase and stockholders’ equity increases.
83) On September 10, MFP Co. paid employee salaries of $7,000 owed to its employees last
month. What are the effects of this transaction on the accounting equation?
A) Expenses increase and liabilities increase.
B) Assets decrease and liabilities decrease.
C) Assets decrease and expenses decrease.
D) Expenses decrease and liabilities decrease.
84) Following are transactions of Gotebo Tanners, Inc., a new company, during the month of
January:
Issued 10,000 shares of common stock for $15,000 cash.
Purchased land for $12,000, signing a note payable for the full amount.
Purchased office equipment for $1,200 cash.
Received cash of $14,000 for services provided to customers during the month.
Purchased $300 of office supplies on account.
Paid employees $10,000 for their first month’s salaries.
What was the total amount of Gotebo’s liabilities following these six transactions?
A) $12,300.
B) $27,300.
C) $22,600.
D) $15,500.
85) Following are transactions of Gotebo Tanners, Inc., a new company, during the month of
January:
Issued 10,000 shares of common stock for $15,000 cash.
Purchased land for $12,000, signing a note payable for the full amount.
Purchased office equipment for $1,200 cash.
Received cash of $14,000 for services provided to customers during the month.
Purchased $300 of office supplies on account.
Paid employees $10,000 for their first month’s salaries.
How many of these transactions decreased Gotebo’s total assets?
A) One.
B) Two.
C) Three.
D) Four.
86) Following are transactions of Gotebo Tanners, Inc., a new company, during the month of
January:
Issued 10,000 shares of common stock for $15,000 cash.
Purchased land for $12,000, signing a note payable for the full amount.
Purchased office equipment for $1,200 cash.
Received cash of $14,000 for services provided to customers during the month.
Purchased $300 of office supplies on account.
Paid employees $10,000 for their first month’s salaries.
How many of these transactions increased Gotebo’s liabilities?
A) Four.
B) Three.
C) Two.
D) One.
87) Consider the following transactions:
Issued common stock for cash.
Purchased equipment by signing a note payable.
Paid rent for the current month.
Collected cash from customers on account.
How many of these transactions increased the company’s total assets?
A) One.
B) Two.
C) Three.
D) Four.
88) How many of the following transactions would increase total assets in the current period?
• Collect cash from customer prior to providing service.
• Provide services to customer and receive cash at time of service.
• Provide services on account to customer.
• Collect cash from customer for services provided on account.
A) One.
B) Two.
C) Three.
D) Four.
89) How many of the following transactions would increase total liabilities in the current period?
• Pay for advertising that will not occur until the following period.
• Collect cash from customer prior to providing service.
• Incur, but not pay, utilities cost in the current period.
• Order supplies that have not yet been received.
A) One.
B) Two.
C) Three.
D) Four.
90) How many of the following transactions would increase total stockholders’ equity in the
current period?
• Pay dividends to stockholders.
• Delay payment on supplies purchased until the following period.
• Provide services on account to customers.
• Borrow cash from a local bank.
A) One.
B) Two.
C) Three.
D) Four.
91) How many of the following transactions would decrease total stockholders’ equity in the
current period?
• Pay dividends to stockholders.
• Delay payment on supplies purchased until the following period.
• Provide services on account to customers.
• Borrow cash from a local bank.
A) One.
B) Two.
C) Three.
D) Four.
92) Assume that Sallisaw Sideboards, Inc. had a retained earnings balance of $10,000 on April 1,
and that the company had the following transactions during April.
Issued common stock for cash, $5,000.
Provided services to customers on account, $2,000.
Provided services to customers in exchange for cash, $900.
Purchased equipment and paid cash, $4,300.
Paid April rent, $800.
Paid employees’ salaries for April, $700.
What was Sallisaw’s retained earnings balance at the end of April?
A) $11,400.
B) $12,100.
C) $16,400.
D) Some other amount.
93) Consider the following transactions:
Issued common stock for cash.
Purchased equipment by signing a note payable.
Provided services to customers on account.
Collected cash from customers on account.
How many of these transactions increased the company’s total liabilities?
A) One.
B) Two.
C) Three.
D) Four.
94) Which of the following transactions causes a decrease in stockholders’ equity?
A) Pay dividends to stockholders.
B) Obtain cash by borrowing from a local bank.
C) Provide services to customers on account.
D) Purchase office equipment for cash.
95) How many of the following events would require an expense to be recorded?
Ordering office supplies.
Hiring a receptionist.
Paying employees’ salaries for the current month.
Receiving, but not paying, a current utility bill.
Paying for insurance in advance.
A) One.
B) Two.
C) Three.
D) Four.
96) Which of the following is NOT possible for a business transaction?
A) Increase assets and decrease revenue.
B) Decrease assets and increase expenses.
C) Increase liabilities and increase expenses.
D) Decrease liabilities and increase revenue.
97) 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 services to customers on account.
98) 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.
99) 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.
100) Which of the following transactions would cause an increase in both the assets and
liabilities of a company?
A) Pay for the current month’s rent.
B) Pay for inventory purchased 90 days ago.
C) Purchase a building by issuing a note payable.
D) Provide services on account.
101) 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 net change.
D) Increase assets and increase stockholders’ equity.
102) “Record revenue when goods or services are provided to customers” is the definition of
which principle in accounting?
A) Trial balance.
B) Debits and credits.
C) Revenue recognition.
D) Accounting equation.
103) Which of the following is possible for a particular business transaction?
A) Increase assets and decrease liabilities.
B) Decrease one asset and increase another asset.
C) Decrease assets and increase stockholders’ equity.
D) Decrease liabilities and increase expenses.
104) 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.
105) 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.
106) 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.
107) Assets normally carry a ________ balance and are shown in the ________.
A) Debit; Statement of stockholders’ equity
B) Debit; Income statement
C) Credit; Balance sheet
D) Debit; Balance sheet
108) Revenues normally carry a ________ balance and are shown in the ________.
A) Debit; Statement of stockholders’ equity
B) Credit; Income statement
C) Credit; Balance sheet
D) Debit; Balance sheet
109) Dividends normally carry a ________ balance and are shown in the ________.
A) Debit; Statement of stockholders’ equity
B) Debit; Income statement
C) Credit; Balance sheet
D) Debit; Balance sheet
110) Expenses normally carry a ________ balance and are shown in the ________.
A) Debit; Statement of stockholders’ equity
B) Debit; Income statement
C) Credit; Balance sheet
D) Debit; Balance sheet