5) 5) Th e accounting equation for Long Company shows an increase in its assets

Question

5) 5) Th e accounting equation for Long Company shows an increase in its assets and an increase in its liabilities. Which of the following transactions could have caused that effect? A) Advertising expense for the month was paid in cash. B) Equipment was purchased on credit. C) Cash was received from providing services to a customer. D) Supplies were purchased for cash. E) Cash was received as a stockholder investment. 6) Contessa Company collected $42,000 cash on its accounts receivable. The effects of6) this transaction as reflected in the accounting equation are: A) Total assets increase and equity decreases. B) Total assets, total liabilities, and total equity are unchanged. C) Both total assets and equity are unchanged and liabilities increase. D) Total assets decrease and equity increases. E) Both total assets and total liabilities decrease. 7) Operating activities: 7) A) Involve using resources to research, develop, purchase, produce, distribute and market products and services. B) Are the means organizations use to pay for resources like land, buildings and equipment. C) Are also called strategic management. D) Involve acquiring and disposing of resources that a business uses to acquire and sell its products or services. E) Are also called asset management. 8) The full disclosure nrincinl

Explanation / Answer

5) When equipment is purchased on credit, equipment balance in assets side increases and note payable balance on liabilities side also increases.

OPTION B

6) When cash is collected from accounts receivable, cash balance on the assets side increases and for equal amount accounts receivable will be decreased. There will be no change in the total of assets, liabilities and equity.

OPTION B

7) The goods purchased and sold in the normal course of business is known as operating activity.

OPTION D

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