Question

1) A bill is received for electric service; the charge for the electricity is recorded, but payment will be made later. For this transaction, identify the effect on the accounting equation. a Liabilities decrease and assets decrease. b. Assets, increase and liabilities increase. Subiabilities increase and stockholders' equity decreases. d.Assets, increase and stockholders' equity increases./ 2)Which one of the following subtotals or totals would appear in a multiple-step, but not a single-step, income statement? a Income from operations b.Cost of goods sold SuIncome tax expense d.Net income

Answer 1

Solution:

1.

c. Liability increase and stock holders equity decreases

2.

a. Income from operations

Explanation:

1.

Here the liability for payment of electricity increases and electricity expenses have to be paid. The journal entry is debit the electricity expenses and credit the accrued liabilities. Electricity expenses will reduce the net income then the stockholders equity also decrease. The accured liabilities is an liability it decreases when it is credited.

2.

Cost of goods sold and income tax expense will appear in the single step and multi step income staement but Income from operations is appear in multi step income statement only.