Question

Q1-5

Multiple Choice Questions (20 points) Circle the right answer 1) Which of the following is the CORRECT accounting equation? A) Assets + Liabilities - Owners' equity B) Assets - Liabilities + Owners' equity C) Assets + Revenue - Owners' equity D) Assets + Revenue Liabilities + Expenses 2) Owner's equity is $150,000 and total liabilities are $90,000. Total assets would be: A) $300.000 B) S180,000. C) $60,000. D) $240,000 150, 900 90,000 3) A business settles a liability by making a payment with cash. How does paying this liability affect the accounting equation? A) Assets decrease: liabilities decrease. B) Liabilities decrease; owner's equity increases. C) Assets increase; liabilities increase. D) Assets increase; liabilities decrease. 4) An individual asset has increased. Which of the following is possible? A) There is an equal decrease in another asset. B) There is an equal decrease in owner's equity. C) There is an equal decrease in a liability account. D) Both liabilities and owner's equity decrease. 5) Ahmet's Camera Shop started the year with total assets of $80,000 and total liabilities of $40,000. During the year, the business earned revenues of $120,000 and incurred expenses of $70,000. Scott made no capital contributions during the year, but did make withdrawals of $60,000. The net change in Scott's owner's equity for the year is a: A) $10,000 decrease. B) $40,000 increase. C) $30,000 decrease. D) $50,000 increase.

Answer 1

(1) B) Assets = Liabilities + Owners' equity (2)D) $240,000 Assets = Liabilities + Owners' equity ? = $90,000 + $150,000 $ 2,40,000 (3) A) Assetrs decrease; liabilities decrease For example Cash Available balance 1,00,000.00 Making Payment -50,000.00 Ending balance 50,000.00 Asset Liability 50,000.00 -50,000.00 Liability (4) A) There is an equal decrease in anonther asset. (5) A) $10,000 decrease $ 40,000 Capital calculation Initial capital (Capital = Total Asset - Total Liability) Add: Net income for the year ($120,000 - $70,000) Less: Drawings Ending Balance 50,000 -60,000 $ 30,000 Net change in Owners' capital = $40,000 - $30,000 = $10,0000 decrease