1. A company issues $20 million in new stock. The company later uses this money to...
1. A company issues $20 million in new stock. The company later uses this money to acquire a building. What is the resulting effect of these transactions on the accounts?
A. Cash increases, Building increases, and Contributed Capital increases.
B. Cash decreases, Building increases, and Contributed Capital decreases.
C. Building increases, and Contributed Capital increases.
D. Building increases, and Contributed Capital decreases.
2. A Company has $15,000 of retained earnings, $26,000 of assets, and $6,000 of liabilities. How much is contributed capital?
A $35,000
B $17,000
C $5,000
D $15,000
3. Which of the following statements is true?
A Liabilities - Assets = Stockholders' Equity.
B A decrease in contributed capital would be recorded with a credit.
C It's normal to have more decreases in an account than increases.
D The total value of credits in all accounts must always equal the total value of debits in all accounts.
4. Which of the following statements regarding cash and accrual accounting is true?
A The cash basis of accounting works best when a lengthy delay exists between the timing of cash flows and the underlying business activities to which they relate.
B If payment is received at the same time a service is produced and sold, there is no difference between how cash and accrual accounting record the transaction.
C If a company receives a bill for rent for the period and decides to delay payment, the rent will not be recorded as an expense according to the accrual model of accounting.
D The cash basis of accounting would record unearned revenue if a company received a deposit in advance of services to be rendered by the company.
5. When expenses exceed revenues in a period, stockholders' equity will increase.
True
False
Homework Answers
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| Please find below the answer | |
| Q1 C. Building increases, and Contributed Capital increases. | |
| Q2 | |
| Liabilities | 6,000.00 |
| Retained earnings | 15,000.00 |
| Total Liability and Retained earnings | 21,000.00 |
| Total Liability and stockholder equity = Assets | 26,000.00 |
| contributed capital = 26000 - 21000 | 5,000.00 |
| Q3 | |
| D The total value of credits in all accounts must always equal the total value of debits in all accounts | |
| Q4 B If payment is received at the same time a service is produced and sold, there is no difference between how cash and accrual accounting record the transaction. | |
| Q5 False since there would be loss so stockholder equity would decrease. | |
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