1) Which of the following transactions would cause one asset to increase and another asset to decrease?
A. The owner invested cash in the business
b. the business paid a creditor
c. the business incurred an expense on credit
d. the business bought supplies for cash.
2) Bob purchased a new computer for the company on account. The transaction will.
a. increase computer; increase capital
b. decrease cash; increase accounts payable
c. decrease cash; increase computer
d. increase computer; increase accounts payable
3) Mary invested cash in her new business. What effect will this have?
a. increase an asset and increase a liability
b. decrease as asset and increase a liability
c. increase an asset and increase owner’s equity
d. increase as asset and decrease owner’s equity
4) Bonnie’s Baskets purchases $4,000 worth of office equipment on account. This causes
a. cash and capital to decrease
b. office equipment and accounts payable to increase
c. office equipment to decrease and accounts payable to increase
d. accounts payable to increase and capital to decrease
5) Which of the following would result if a business purchased equipment paying a 40% down payment in cash?
a. equipment would increase and cash would decrease
b. accounts payable would increase
c. since the equipment has not been paid in full, there is nothing to record
d. both and b are correct.
6) Katie’s vegetarian restaurant, with total assets of $90,000, borrows $15,000 from the bank. Which of the following is a true statement upon borrowing the money?
a. total assets are now $105,000
b. total assets are now $80,000
c. total assets are now $15,000
d. total assets are now $75,000
7) Which of the following will be recorded in the owner’s equity column as an increase?
a. an exchange of assets
b. the purchase of an asset on credit
c. an investment by the owner
d. a withdrawal by the owner
8) How does the purchase of office equipment on account affect the accounting equatiion?
a. assets increase; liabilities decrease
b. assets increase; owner’s equity increases
c. assets increase; liabilities increase
d. liabilites increase; owner’s equity decreases
9) If total liabilities are $1,000 and total assets are $8,000, owner’s equity must be.