Question

Practice Multiple-Choice Questions 1. (LO 1) The effects on the basic accounting equation of perform ing services for cash are to: a. increase assets and decrease stockholders' equity. b. increase assets and increase stockholders' equity. c. increase assets and increase liabilities. d. increase liabilities and increase stockholders' equity. 2. (LO 1) Genesis Company buys a $900 machine on credit. This transaction will affect the: a. income statement only b. balance sheet only. c. income statement and retained earnings statement only. d. income statement, retained earnings statement, and balance sheet. 3. (LO 1) Which of the following events is not recorded in the accounting records? a. Equipment is purchased on account b. An employee is terminated. c. A cash investment is made into the business. d. Company pays dividend to stockholders. 4. (LO 1) During 2022, Gibson Company assets asset $50,000 and its liabilities decreased $90,000. Its wock equity therefore: a. increased $40,000. b. decreased $140,000. c. decreased $40,000 d. increased $140,000 5. (LO 2) Which statement about an account is true? a. An account consists of a title, a debit side, and a ledger side. b. An account is an individual accounting record of increases and decreases in specific asset, liability, and stockholders equity items c. There are separate accounts for specific assets and liabilities but only one account for stockholders' equity items. d. The left side of an account is the credit, or decrease, side. 6. (LO2) Debits: a. increase both assets and liabilities, b. decrease both assets and liabilities. c. increase assets and decrease liabilities. d. decrease assets and increase liabilities. 7. (LO 2) A revenue account: a. is increased by debits. b. is decreased by credits. c. has a normal balance of a debit. d. is increased by credits. 8. (LO 2) Which accounts normally have debit balances? a. Assets, expenses, and revenues. b. Assets, expenses, and retained earnings. c. Assets, liabilities, and dividends. d. Assets, dividends, and expenses. 9. (LO2) Paying an account payable with cash affects the compo- nents of the accounting equation in the following way. a. Decreases stockholders' equity and decreases liabilities. b. Increases assets and decreases liabilities. c. Decreases assets and increases stockholders' equity. d. Decreases assets and decreases liabilities. 10. (LO3) Which is not part of the recording process? 2. Analyzing transactions. b. Preparing an income statement. c. Entering transactions in a journal. d. Posting journal entries. 11. (LO 3) Which of these statements about a journal is false? a. It contains only revenue and expense accounts. b. It provides a chronological record of transactions. c. It helps to locate errors because the debit and credit amounts for each entry can be readily compared. d. It discloses in one place the complete effect of a transaction. 12. (LO 4) A ledger: a. contains only asset and liability accounts. b. should show accounts in alphabetical order. c. is a record of all accounts maintained by a company and their amounts. d. provides a chronological record of transactions. 13. (L04) Posting: a. normally occurs before journalizing. b. transfers ledger transaction data to the journal. c. is an optional step in the recording process. d. transfers journal entries to ledger accounts.

Answer 1

1).

b. Increases assets and increases stockholders' equity

When the service performed for cash will increases the service revenue and cash account balance.

Cash - Asset account - Increases
Service revenue - Revenue account increases - Net income increases - Stockholders' equity increases

2).

b. Balance sheet only

The entry to record the purchase of machine on credit is given as follows:

Debit - Machine account
Credit - Accounts payable account

Both machine and accounts payable accounts are reported on the balance sheet, because, the machine is an asset account and the accounts payable is a liability account.

3).

b. An employee is terminated

Only the monetary transactions are recorded in the accounting records. The termination of the employee can not be measured in terms of money.

4).

Question is not visible properly:

If the asset decreased $50,000:

Total assets = Total liabilities + Total stockholders' equity
Asset decreased $50,000 = Liabilities decreased $90,000 + Stockholders' equity increased $40,000

a. Increased $40,000.

If the asset increased $50,000:

Total assets = Total liabilities + Total stockholders' equity
Asset increased $50,000 = Liabilities decreased $90,000 + Stockholders' equity increased $140,000

d. Increased $140,000.

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