equity must be ($500 − $200), or $300.
References
Multiple Choice Difficulty: 1 Easy Learning Objective: 01-03 Identify the elements of the accounting
equation.
If a company's total assets increased while liabilities and common stock were unchanged, then which of the following statements is true?
Revenues were greater than expenses.
Retained earnings were less than net income during the period.
No dividends were paid during the period.
The company must have purchased assets with cash.
If a company's total assets increased while liabilities and common stock were unchanged, retained earnings must have increased. In order for retained
earnings to increase, the company must have reported net income as a result of revenues exceeding expenses.
References
Multiple Choice Difficulty: 3 Hard Learning Objective: 01-04 Show how business events affect the
accounting equation.
Li Company paid cash to purchase land. As a result of this accounting event, which of the following statements is true?
Total assets decreased.
Total assets were unaffected.
Total stockholders’ equity decreased.
Both assets and total stockholders’ equity decreased.
Paying cash for land is an asset exchange transaction that increases one asset (land) and decreases another asset (land). The result is no overall change in
total assets.
References
Multiple Choice Learning Objective: 01-04 Show
how business events affect the
accounting equation.
Difficulty: 1 Easy Learning Objective: 01-06 Classify
business events as asset source,
use, or exchange transactions.
28.
Award: 1.00 point
29.
Award: 1.00 point
Wyatt Company was formed on January 1, Year 1, when it acquired $50,000 cash from issuing common stock. Which of the following shows the impact of this
transaction on Wyatt’s accounting equation?
Assets = Liabilities + Stockholders’ Equity
A. +/− n/a n/a
B. + n/a +
C. − n/a −
D. + + n/a
Option A
Option B
Option C
Option D
Acquiring cash from issuing common stock will increase assets (Cash) and increase stockholders’ equity (Common Stock). There is no impact on liabilities.
References
Multiple Choice Difficulty: 1 Easy Learning Objective: 01-04 Show how business events affect the
accounting equation.
Wing Company borrowed $70,000 cash from Metropolitan Bank. Which of the following shows the impact of this transaction on Wing’s accounting equation?
Assets = Liabilities + Stockholders’ Equity
A. +/− n/a n/a
B. + n/a +
C. − n/a −
D. + + n/a
Option A
Option B
Option C
Option D
Borrowing cash from the bank will increase assets (Cash) and increase liabilities (Notes Payable). There is no impact on stockholders’ equity.
References
Multiple Choice Difficulty: 1 Easy Learning Objective: 01-04 Show how business events affect the
accounting equation.
30.
Award: 1.00 point
31.
Award: 1.00 point
Wing Company provided services for $30,000 cash. Which of the following shows the impact of this transaction on Wing’s accounting equation?
Assets = Liabilities + Stockholders’ Equity
A. +/− n/a n/a
B. + n/a +
C. − n/a −
D. + + n/a
Option A
Option B
Option C
Option D
Providing services for cash is considered revenue. The cash revenue increases assets (Cash) and stockholders’ equity (Retained Earnings).
References
Multiple Choice Difficulty: 1 Easy Learning Objective: 01-04 Show how business events affect the
accounting equation.
Wing Company paid $20,000 cash in salaries to its employees. Which of the following shows the impact of this transaction on Wing’s accounting equation?
Assets = Liabilities + Stockholders’ Equity
A. +/− n/a n/a
B. + n/a +
C. − n/a −
D. + + n/a
Option B
Option A
Option C
Option D
An economic sacrifice a business incurs in the process of generating revenue is called an expense. The asset account Cash decreases and the stockholders’