Question

13) When a company receives a prepayment from a customer and provides services to the customer 4 months later, what is the effect on the company’s accounting equation when the company provides the services?

Group of answer choices

Assets decrease and stockholders’ equity decreases

Assets decrease and liabilities decrease

Assets increase and stockholders' equity increases

Liabilities decrease and stockholders' equity increases

14)

Donaldson Corp wanted to expand the size of its manufacturing plant in order to generate more profits. The company decided to purchase the building adjacent to its existing plant for $140,000 by entering into a contract with the seller to make 10 annual payments to them plus interest starting one year after purchase. The purchase would be recorded by Donaldson as:

Group of answer choices

DR: Buildings Expense 140,000 CR: Cash 140,000

DR: Buildings 140,000 CR: Cash 140,000

DR: Buildings 140,000 CR: Notes Payable 140,000

DR: Notes Payable 140,000 CR: Buildings 140,000

15)

Which of the accounts are increased on the debit side and decreased on the credit side?

Group of answer choices

Assets, liabilities, and revenues

Liabilities, stockholders’ equity, and revenues

Expenses, assets, and dividends

Expenses, liabilities, and assets

16)

Assume that $24,000 cash is paid for rent on January 1 to cover the next year. The appropriate journal entry on January 1 is:

Group of answer choices

DR: Prepaid Rent 24,000 CR: Cash 24,000

DR: Prepaid Rent 24,000 CR: Accounts Payable 24,000

DR: Cash 24,000 CR: Rent Expense 24,000

DR: Rent Expense 24,000 CR: Cash 24,000

Answer 1

Answer(13) Option(d) is the correct answer Liabilities decrease and Stockholder's equity increases Explanation The following journal entry will be passed when the company provides the service. Unearned Revenue XXX Revenue XXX Answer(14) Option(c) is the correct answer Explanation The following journal entry will be passed when the Building is Purchased. Building 40,000 Notes Payable 140,000 Answer(15) Option(c) is the correct answer Explanation Expenses, Assets and Dividend increased on the Debit side and decreased on the Credit side. Answer(16) Option(a) is the correct answer Explanation The following journal entry will be passed when cash is paid for Rent. Prepaid Rent 24,000 Cash 24,000