1. The purchase of an asset (like Equipment) for cash will a) increase total ass
ID: 2428256 • Letter: 1
Question
1. The purchase of an asset (like Equipment) for cash willa) increase total assets and increase total liabilities
b) have no effect on total assets or liabilities
c) increase total liabilities and decrease total assets
d) increase total assets and increase owner's equity
e) increase total assets and decrease owner's equity
2. If a $25 cash purchase of supplies is recorded as a $52 debit to Supplies Expense and a $52 credit to Cash, the result will be that
a) the trial balance will be out of balance
b) the Supplies Expense account will be understated
c) the Cash account will be overstated
d) Supplies Expense will be overstated and Cash will be understated
e) none of these will be true
3. In preparing the first two closing entries, to which of the following columns of the work sheet does one refer?
a) balance sheet columns
b) adjusted trial balance columns
c) income statement columns
d) trial balance columns
e) adjustments columns
4. Net income for Susan's Treasures is $25000 for the current year. The owner withdrew $2000 per month for personal living expenses, The owner's Capital account will show a net
a) decrease of $1000
b) increase of $49000
c) decrease of $24000
d) increase of $1000
e) increase of $25000
Explanation / Answer
1.Option b is the correct answer. The purchase of an asset like equipment for cash it have no effect on total assets or liabilities Purchase of an asset (equipment) Cash balance decreases Eqi[ment account balance increases. Hence it have no effect on total assets or liabilities. 2.Option d is the correct answer. Supplies Expenses will be overstated and Cash will be understated. Cash purchases of supplies recorded as $52.,instead of $25 Hence supplies account overstated. Cash payment recorded $52 instead of $25 Hence cash account understated. 3. Option a is the correct answer. In preparing the first two closing entries, those have effect on balance sheet only. Cash,Equipment,supplies, cash these are all balance sheet items. 4.Option c is the correct answer. Net income $25,000 Drawings(2,000*12)= 24,000 The owner's capital account will show a net decrease $24,000Related Questions
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