Question

1. Which of the following economic events would require a journal entry according to the FASB’s conceptual framework?
   1. Bankruptcy of a competitor
   2. A prospective employee is interviewed
   3. Increase in brand awareness by consumers
   4. Change in the estimate of uncollectible customer accounts
   5. Management commits to issuing quarterly earnings guidance
2. Which of the following scenarios is not possible as a result of a single transaction (all else equal)?
   1. Increase total liabilities and decrease total assets
   2. Increase total assets and increase total stockholders’ equity
   3. Increase expenses, decrease stockholders’ equity, and increase a contra-asset
   4. All of the above are possible as a result of a single transaction
   5. None of the above is possible as a result of a single transaction

Answer 1

Question 1

Correct answer----(C) Change in the estimate of uncollectible customer accounts

All other transaction stated above do not require ant journal entry or as they do not confirm as a financial transaction.

Question 2

Correct answer---(a) Increase total liabilities and decrease total assets.

If liabilities are increasing then asset has to increase or shareholder’s equity will decrease with the same amount. Decrease in asset involve a credit to asset and increase in liabilities also involve a credit entry. There has to be a debit entry to make the balance sheet match.