- There are four transactions that affect stockholders’ equity. Which are the two transactions that increase stockholders’ equity?
A. Revenues and expenses
B. Expenses and dividends
C. Revenues and stockholders’ investments
D. Stockholders investments and expenses - There are four transactions that directly affect Stockholders’ Equity. Which are the two transactions that decrease Stockholders’ Equity?
A. Dividends and expenses
B. Revenues and expenses
C. Stockholders’ investments and revenues
D. Stockholders’ investments and expenses - Rivers Computer Makeover Company has received $3,500 in cash for services rendered. What affect does this transaction have on the accounting equation?
A. Increase Assets (Cash) and decrease Stockholders’ Equity (Expenses)
B. Increase Assets (Cash) and decrease Assets (Accounts Receivable)
C. Increase Assets (Accounts Receivable) and increase Stockholders’ Equity (Fees Earned)
D. Increase Assets (Cash) and increase Stockholders’ Equity (Fees Earned) - Rivers Computer Makeover Company paid their first installment on their Notes Payable in the amount of $2,000. How will this transaction affect the accounting equation?
A. Increase Liabilities (Notes Payable) and decrease Assets (Cash)
B. Decrease Assets (Cash) and decrease Stockholders’ Equity (Note Payable Expense)
C. Decrease Assets (Cash) and decrease Assets (Notes Receivable)
D. Decrease Assets (Cash) and decrease Liabilities (Notes Payable) - Rivers Computer Makeover Company received their first electric bill in the amount of $60 which will be paid next month. How will this transaction affect the accounting equation?
A. Increase Liabilities (Accounts Payable) and decrease Stockholders’ Equity (Utilities Expense)
B. Increase Liabilities (Accounts Receivable) and decrease Stockholders’ Equity (Utilities Expense)
C. Decrease Assets (Cash) and decrease Liabilities (Accounts Payable)
D. Decrease Assets (Cash) and decrease Stockholders’ Equity (Utilities Expense) - Rudy Rivers has withdrawn $750 from Rivers Computer Makeover Company’s cash account to deposit in his personal account. How does this transaction affect Rivers Computer Makeover Company’s accounting equation?
A. Increase Assets (Accounts Receivable) and decrease Assets (Cash)
B. Decrease Assets (Cash) and decrease Stockholders’ Equity (Dividends)
C. Decrease Assets (Cash) and decrease Liabilities (Accounts Payable)
D. Increase Assets (Cash) and decrease Stockholders’ Equity (Dividends) - Which of the following is not a business transaction?
A. Becky deposits $25,000 in a bank account in the name of Becky’s Daycare.
B. Becky provided services to customers earning fees of $300.
C. Becky pays her monthly personal credit card bill.
D. Becky hires a part-timer to begin work next week.
E. Becky purchased cribs for her daycare agreeing to pay the supplier next month. - The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time, such as a month or year, is called a(n)
A. prior period statement
B. statement of retained earnings
C. income statement
D. balance sheet - All of the following are financial statement(s) of a corporation except the
A. statement of retained earnings
B. statement of owner’s equity
C. income statement
D. statement of cash flows - Which of the following financial statements reports information as of a specific date?
A. income statement
B. statement of retained earnings
C. statement of cash flows
D. balance sheet
The Correct Answer and Explanation is :
Here are the answers and explanations for the given questions:
141. Which are the two transactions that increase stockholders’ equity?
Answer: C. Revenues and stockholders’ investments
Explanation:
Stockholders’ equity is affected by two main types of transactions: revenues and stockholders’ investments. Revenues increase stockholders’ equity because they represent earnings that contribute to the company’s profit. Similarly, stockholders’ investments increase equity because they represent new capital injected into the business. On the other hand, expenses and dividends decrease stockholders’ equity.
142. Which are the two transactions that decrease stockholders’ equity?
Answer: A. Dividends and expenses
Explanation:
Dividends reduce stockholders’ equity because they are payouts to shareholders, which represent a distribution of earnings rather than reinvestment in the business. Expenses reduce stockholders’ equity because they represent the costs incurred to generate revenues. These costs reduce the overall profitability, and, therefore, the equity of the company.
143. What affect does receiving $3,500 in cash for services rendered have on the accounting equation?
Answer: D. Increase Assets (Cash) and increase Stockholders’ Equity (Fees Earned)
Explanation:
When a company receives cash for services rendered, it increases its cash (asset) account. Additionally, the company earns revenue, which increases stockholders’ equity through the service income (fees earned). Therefore, the correct transaction is an increase in assets (cash) and an increase in stockholders’ equity (fees earned).
144. What affect does paying $2,000 on Notes Payable have on the accounting equation?
Answer: D. Decrease Assets (Cash) and decrease Liabilities (Notes Payable)
Explanation:
When the company pays off part of its notes payable, cash (an asset) decreases as the payment is made. At the same time, the liability (notes payable) decreases because the company has reduced its outstanding debt. This results in a decrease in both assets and liabilities.
145. How does receiving a $60 electric bill affect the accounting equation?
Answer: A. Increase Liabilities (Accounts Payable) and decrease Stockholders’ Equity (Utilities Expense)
Explanation:
Receiving an electric bill creates a liability because the company owes money for the service, which increases accounts payable. The corresponding expense (utilities expense) reduces stockholders’ equity, as it is part of the operating costs of the company that affects profits. The company will eventually pay the bill, but the initial effect is an increase in liabilities and a decrease in stockholders’ equity.
146. How does Rudy Rivers withdrawing $750 from the company affect the accounting equation?
Answer: B. Decrease Assets (Cash) and decrease Stockholders’ Equity (Dividends)
Explanation:
When a business owner withdraws money from the company, it is typically treated as a dividend or a distribution. This reduces both the company’s cash (asset) and its equity (through a decrease in stockholders’ equity due to the dividend). It does not affect liabilities or increase any other assets.
147. Which of the following is not a business transaction?
Answer: C. Becky pays her monthly personal credit card bill.
Explanation:
Paying a personal credit card bill is not a business transaction. Business transactions must involve exchanges that affect the business’s financial position, such as the purchase of goods or services for the business, or depositing capital into the business account. Personal financial matters, like paying personal credit card bills, do not impact the business’s financial records.
148. The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time is called a(n):
Answer: C. Income Statement
Explanation:
The income statement shows the company’s revenues and expenses over a specific period, usually a month or a year. This statement helps assess profitability by showing the difference between the income earned and the expenses incurred.
149. Which of the following is not a financial statement of a corporation?
Answer: B. Statement of owner’s equity
Explanation:
The statement of owner’s equity is typically used for sole proprietorships or partnerships, not corporations. In corporations, stockholders’ equity is reported on the balance sheet. The income statement, statement of retained earnings, and statement of cash flows are all financial statements used by corporations.
150. Which of the following financial statements reports information as of a specific date?
Answer: D. Balance Sheet
Explanation:
The balance sheet reports the financial position of a company as of a specific date. It lists assets, liabilities, and stockholders’ equity at that point in time. The other statements, such as the income statement and statement of cash flows, report results over a period of time, not at a specific date.
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