Financial Accounting 9th Edition by Miller-Nobles Test bank

A-Head: How do you analyse transactions?

27. Hamilton Lawn Service incurred an $800 repair expense and paid the repair company in cash. Which account, besides Cash, decreased?

1. Accounts payable
2. Accounts receivable
3. Equipment
4. Owners' capital

Answer: D
Difficulty: Moderate
AACSB: Analytical Thinking
Learning Objective: 3 Use the accounting equation to analyse transactions
A-Head: How do you analyse transactions?

28. Martin Supply Service paid $350 cash to a materials supplier that it owed from the previous month. What is the effect of the cash payment on account of the business?

1. Accounts payable increases; Owners' capital account decreases.
2. Cash account decreases; Accounts payable decreases.
3. Materials account increases; Owners' capital account decreases.
4. Cash account decreases; Accounts payable increases.

Answer: B
Difficulty: Moderate
AACSB: Analytical Thinking
Learning Objective: 3 Use the accounting equation to analyse transactions
A-Head: How do you analyse transactions?

29. Martin Supply Service received $1 000 cash from a customer which was owed to the business from the previous month. What is the effect of the cash receipt on the accounts of the business?

1. Cash account increases; Accounts receivable decreases.
2. Accounts payable increases; Owners' capital account decreases.
3. Accounts receivable decreases; Owners' capital account decreases.
4. Cash increases; Accounts payable decreases.

Answer: A
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Difficulty: Moderate
AACSB: Analytical Thinking
Learning Objective: 3 Use the accounting equation to analyse transactions
A-Head: How do you analyse transactions?

30. The proprietor of Martin Supply Service took a $5 000 cash withdrawal. What is the effect of the withdrawal on the accounts of the business?

1. Cash account increases; Accounts receivable decreases.
2. Cash account increases; Owners' capital account decreases.
3. Accounts payable increases; Owners' capital account decreases.
4. Cash account decreases; Owners' capital account decreases.

Answer: D
Difficulty: Moderate
AACSB: Analytical Thinking
Learning Objective: 3 Use the accounting equation to analyse transactions
A-Head: How do you analyse transactions?

31. A $7 000 account payable is paid by the business. How is the accounting equation affected?

1. Assets decrease $7 000; liabilities decrease $7 000.
2. Assets decrease $7 000; owners' equity increases $7 000.
3. Assets increase $7 000; owners' equity decreases $7 000.
4. Assets increase $7 000; liabilities increase $7 000.

Answer: A
Difficulty: Moderate
AACSB: Analytical Thinking
Learning Objective: 3 Use the accounting equation to analyse transactions
A-Head: How do you analyse transactions?

32. A business performs services for its customers. Payment is expected to be received next month. How does the performance of services affect the accounting equation?

1. Assets increase; owners' equity increases.
2. Liabilities increase; owners' equity decreases.
3. Assets decrease; owners' equity decreases.
4. Assets increase; owners' equity decreases.

Answer: A
Difficulty: Moderate
AACSB: Analytical Thinking
Learning Objective: 3 Use the accounting equation to analyse transactions
A-Head: How do you analyse transactions?

33. A business receives a bill for services rendered from one of its suppliers. The business will pay the supplier next month. When the business receives the bill from its supplier, how does this affect the accounting equation?

1. Liabilities increase; owners' equity increases.
2. Assets decrease; owners' equity decreases.