Purchasing land for cash is an investing activity.
References
Multiple Choice Difficulty: 1 Easy Learning Objective: 01-08 Prepare a statement of cash flows.
Which of following illustrates how earning $4,000 cash for providing services to customers affects the financial statements?
Balance Sheet Income Statement
Sta Assets = Liabilities + Stockholders' Equity Revenue − Expense = Net Income
A. 4,000 n/a 4,000 n/a n/a n/a
B. 4,000 n/a 4,000 4,000 n/a 4,000
C. 4,000 n/a 4,000 4,000 n/a 4,000
D. 4,000 4,000 n/a 4,000 n/a 4,000
Option A
Option B
Option C
Option D
Earning cash revenue increases assets (cash) and stockholders' equity (retained earnings) on the balance sheet. It increases both revenue and net income on
the income statement and is reported as a cash inflow for operating activities on the statement of cash flows.
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-10 Record business events using a horizontal
financial statements model.
115.
Award: 1.00 point
116.
Award: 1.00 point
Jackson Company paid $500 cash for salary expenses. Which of the following choices accurately reflects how this event affects the company's financial
statements?
Balance Sheet Income Statement
St
Assets = Liabilities +
Stockholders'
Equity Revenue − Expense = Net Income
A. n/a 500 (500) n/a 500 (500)
B. (500) n/a (500) n/a 500 (500)
C. (500) n/a (500) n/a n/a n/a
D. (500) n/a (500) n/a 500 (500)
Option A
Option B
Option C
Option D
Paying cash for expenses decreases assets (cash) and decreases stockholders' equity (retained earnings) on the balance sheet. It increases expenses which
decreases net income on the income statement, and is shown as a cash outflow for operating activities on the statement of cash flows.
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-10 Record business events using a horizontal
financial statements model.
Perez Company paid a $300 cash dividend. Which of the following choices accurately reflects how this event affects the company's financial statements?
Balance Sheet Income Statement
Assets = Liabilities + Stockholders' Equity Revenue − Expense = Net Income
A. n/a 300 (300) n/a 300 (300)
B. (300) n/a (300) n/a 300 (300)
C. (300) n/a (300) n/a n/a n/a
D. (300) n/a (300) n/a n/a n/a
Option A
Option B
Option C
Option D
Paying cash dividends decreases assets (cash) and decreases stockholders' equity (retained earnings) on the balance sheet. It does not affect the income
statement, but is reported as a cash outflow for financing activities on the statement of cash flows.
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-10 Record business events using a horizontal
financial statements model.
117.
Award: 1.00 point
118.
Award: 1.00 point
Garrison Company acquired $23,000 by issuing common stock. Which of the following choices accurately reflects how this event affects the company's
financial statements?
Balance Sheet Income Statement
Assets = Liabilities + Stockholders' Equity Revenue − Expense = Net Income
A. 23,000 n/a 23,000 n/a n/a n/a
B. 23,000 n/a 23,000 23,000 n/a 23,000
C. 23,000 23,000 n/a 23,000 n/a n/a
D. 23,000 23,000 n/a 23,000 n/a 23,000
Option A
Option B
Option C
Option D
Issuing common stock increases assets (cash) and stockholders' equity (common stock). It does not affect the income statement, but is reported as a cash
inflow for financing activities on the statement of cash flows.
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-10 Record business events using a horizontal