please answer 12-15 12. During 2010, Sensa Corporation incurred operating expens
ID: 2537348 • Letter: P
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please answer 12-15
12. During 2010, Sensa Corporation incurred operating expenses amounting to S100,000 of which $25,000 was paid in cash; the balance will be paid during 2011. Which of the following is correct for the 2010 year-end balance sheet? (A) Stockholders' equity decreases $25,000 and assets decrease s25,000. (B) Assets decrease $100,000 and stockholders' equity decreases $100,000. (C) Assets decrease $100,000, liabilities increase $75,000, and stockholders' equity decreases $100,000 (D) Stockholders' equity decreases $100,000, assets decrease $25,000, and liabilities increase $75,000 13. Which of the following statements is TRUE? (A)A company's assets and stockholders'equity both increase when the company sells additional shares of stock in exchange for cash. (B) A company's retained earnings balance increased S50,000 last year; therefore, net (C) Cash collected after the providing of the good or service results in an increase in (D) Yelena Company received cash from a customer in advance of providing the income last year must have been $50,000 both assets and revenue. service to the customer. At the time when Yelena later provides the service, assets are increased. 14. Which of the following activities DOES NOT lead to an increase in Assets? (A)ABC sells $100,000 of merchandise to a customer that promises to pay cash within 60 days (B) ABC signs a contract to deliver $100,000 of merchandise to DEF each month for the next year. (C) ABC pays $12 million in January for the annual rent on its office building. (D)ABC buys $10,000 of chemicals to be used as raw materials. 15. Which of the following activities DOES NOT lead to an increase in Liabilities? (A)ABC signs a three-year, $10 million contract to hire its new CEO, starting next month (B) Based on this quarter's operations, ABC estimates that it owes the IRS $1 million in taxes (C) ABC has not yet paid employees who eaned salaries of s1,000,000 during the most recent pay period (D)ABC sells S100,000 gift card to a customer.Explanation / Answer
12. D) Stockholders' equity decreases $100,000, asset decreases $25,000 and liabilties increases $75,000
13. Statement of A and C are true.
Statement B is wrong, because dividend also will affect the retained earnings.
Statement D is wrong, because when Yelena provides service for the cash collected in advance, liability (unearned revenue will decrease) and revenue (stockholders' equity) will increase, but asset will not increase.
14. Activity B and C does not lead to increase in assets.
Justification for wrong ans:
Activity A increases assets (accounts receivable) and revenue.
Activity B does not affect any account.
Activity C increases assets (Prepaid rent) and decreases assets (Cash). So the net effect in assets is $0.
Activity D increases assets
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