financial statements model.
Tandem Company borrowed $32,000 of cash from a local bank. 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. 32,000 32,000 n/a 32,000 n/a 32,000
B. 32,000 n/a 32,000 n/a n/a n/a
C. 32,000 n/a 32,000 32,000 n/a 32,000
D. 32,000 32,000 n/a n/a n/a n/a
Option A
Option B
Option C
Option D
Borrowing cash increases assets (cash) and increases liabilities (notes payable). 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
financial statements model.
119.
Award: 1.00 point
120.
Award: 1.00 point
Which of following illustrates how selling land for cash affects the financial statements?
Balance Sheet Income Statement
Assets = Liabilities + Stockholders' Equity Revenue − Expense = Net Income
A. n/a n/a n/a n/a n/a n/a
B. − n/a − n/a n/a n/a
C. + + n/a n/a n/a n/a
D. − n/a − n/a + −
Option A
Option B
Option C
Option D
Selling land for cash increases one asset (land) and decreases another asset (cash), so it does not affect overall assets, liabilities or stockholders' equity. It does
not affect the income statement, but is reported as a cash outflow for investing 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.
Which of the following could represent the effects of an asset source transaction on a company's financial statements?
Balance Sheet Income Statement
Assets = Liabilities + Stockholders' Equity Revenue − Expense = Net Income
A. + n/a + n/a n/a n/a
B. + + n/a n/a + +
C. + n/a + + n/a +
D. − n/a − n/a n/a n/a
Option A
Option B
Option C
Option D
An asset source transaction increases assets and can either increase liabilities (in the case of borrowing cash) or stockholders' equity (in the case of issuing
stock or earning revenue). It may or may not affect revenue and net income. If the asset that increases is cash, it is reported as a cash inflow on the statement
of cash flows, and can be either an operating or a financing activity.
References
Multiple Choice Learning Objective: 01-06 Classify
business events as asset source,
use, or exchange transactions.
Difficulty: 3 Hard Learning Objective: 01-10 Record
business events using a
horizontal financial statements
model.
121.
Award: 1.00 point
122.
Award: 1.00 point
Which of the following could represent the effects of an asset exchange transaction on a company's financial statements?
Balance Sheet Income Statement
Assets = Liabilities + Stockholders' Equity Revenue − Expense = Net Income
A. +/− n/a n/a n/a n/a n/a
B. +/− + n/a n/a + +
C. − n/a − n/a n/a n/a
D. − n/a − n/a n/a n/a
Option A
Option B
Option C
Option D
An asset exchange transaction increases one asset and decreases another, so it does not affect total assets, liabilities or stockholders' equity. It does not affect
the income statement, and can be reported as a cash inflow or outflow on the statement of cash flow as either an operating or an investing activity.
References
Multiple Choice Learning Objective: 01-06 Classify
business events as asset source,