Question 14 How would a purchase of inventory on credit affect the income statem
ID: 2816402 • Letter: Q
Question
Question 14
How would a purchase of inventory on credit affect the income statement?
It would increase liabilities
It would decrease retained earnings
It would increase assets
None of the above
Question 16
How would a sale of $400 of inventory on credit affect the balance sheet if the cost of the inventory sold was $160?
It would increase noncash assets by $400 and increase equity by $400
It would decrease noncash assets by $160 and decrease equity by $160
It would increase cash by $400 and increase equity by $400
Both the first and the second choices, above happen simultaneously
Question 20
On January 1, Fey Properties collected $7,200 for six months’ rent in advance from a tenant renting an apartment. Fey Company prepares monthly financial statements.
Which of the following describes the required adjusting entry on January 31?
Debit Cash for $7,200 and Credit Rent revenue for $7,200
Debit Unearned rent revenue for $1,200 and Credit Rent revenue for $1,200
Debit Rent revenue for $1,200 and Credit Unearned rent revenue for $1,200
Debit Cash for $6,000 and Credit Unearned rent revenue for $6,000
It would increase liabilities
It would decrease retained earnings
It would increase assets
None of the above
Explanation / Answer
14)
Income statement is concerned with the incomes, expenses and cost of goods sold. It does not consider the financing of purchases and value of inventory. Only inventory sold. i.e. cost of goods sold is recorded in income statement.
Hence, correct option is None of the above.
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