Question

MULTIPLE CHOICE. Choose the one alternative that best completu question. (5 points each) 1) If a company receives $12,000 cash from its sole stockholder to establish a corporation, the effect on the accounting equation would be: A) Assets decrease $12,000 and equity decreases $12,000. B) Assets increase $12,000 and liabilities decrease $12,000. C) Liabilities increase $12,000 and equity decreases $12,000. D) Assets increase $12,000 and liabilities increase $12,000. E) Assets increase $12,000 and equity increases $12,000. 2) If a company uses $1,300 of its cash to purchase supplies, the effect on the account equation would be: A) Assets decrease $1,300 and equity decreases $1,300. B) One asset increases $1,300 and another asset decreases $1,300, causing no e C) Assets increase $1,300 and liabilities increase $1,300. D) Assets decrease $1,300 and equity increases $1,300. E) Assets increase $1,300 and liabilities decrease $1,300. 3) The left side of a T-account is a(n) A) Debit. B) Account balance. C) Increase D) Decrease E) Credit. 4) A debit: A) Always decreases an account. B) Always increases an account. C) Is not needed to record a transaction. D) Is the left-hand side of a T-account. Tn the riøht-hand side of a T-account.

Answer 1

1 . If company received cash of $12000 from sole stockholder to establish a company then it will lead to increase in cash (asset) and increase in capital (equity) as well bothbby $12000.

Therefore, correct answer is option (E). Asset increase $12000 and equity increase $12000.

2 . If company uses $1300 cash to purchase supplies, then on one hand it will reduce Cash (asset) by $1300 and increase supplies (asset) by $1300.

Therefore , correct answer is option (B) .

3 . Left side of The account indicates debit side whereas right side of The account indicates credit side.

Therefore correct answer is (A) . Debit.

4. A debit is a left hand side of a T account.

Therefore correct answer is option (D) . Debit is the left hand side of a T account .