Question 1

Vita Corporation performed services on account for €22,000. This transaction will
A) increase Cash and increase Service Revenue by €22,000.
B) increase Accounts Receivable and increase Service Revenue by €22,000.
C) decrease Accounts Payable and increase Cash by €22,000.
D) increase Cash and decrease Accounts Receivable by €22,000.

Accepted Answer

Vita Corporation performed services on credit (on account) which means they have not received cash yet. So, it will increase Accounts Receivable (an asset account) and increase Service Revenue (a revenue account). Option A is incorrect because there is no transaction involving cash. Option C is incorrect because there is no liability which is being reduced. Option D is incorrect because it does not take into account the increase in Accounts Receivable.

Question 2

Freirs Company paid the monthly rent of €6,000. This transaction will
A) increase Cash and decrease Rent Expense by €6,000.
B) decrease Cash and decrease Rent Expense by €6,000.
C) decrease Cash and increase Rent Expense by €6,000.
D) have no effect on the accounting equation.

Accepted Answer

Rent is an expense and paying rent decreases cash, so the correct answer is option C - decrease Cash and increase Rent Expense by €6,000. This transaction has no effect on any other accounts.

Question 3

As of December 31, 2014, Thames Company reported assets of ₤6,480,000, liabilities of ₤1,920,000 and retained earnings of ₤3,315,000. Share capital reported on the December 31, 2014 statement of financial position is
A) ₤1,245,000.
B) ₤1,395,000.
C) ₤5,235,000.
D) ₤9,795,000.

Accepted Answer

The answer of As of December 31, 2014, Thames Company...

Question 4

Sao Paulo Company performed services on account for R$160,000. This transaction will
A) increase assets and liabilities by R$160,000.
B) increase assets and equity by R$160,000.
C) increase liabilities and equity by R$160,000.
D) have no effect on the accounting equation.

Accepted Answer

Performing services on account means the company has earned revenue but has not yet received the payment. This increases the assets of the company by R$160,000 (accounts receivable) and also increases the equity by the same amount (revenue earned). Therefore, option B is the correct answer.

Question 5

Gafisa Inc. performed services for R$195,000. The company collected R$65,000 in cash. The balance will be collected in 30 days. Performing services for R$195,000 will increase
A) assets by R$65,000 and equity by R$130,000.
B) assets by R$65,000, liablities by R$130,000 and equity by R$195,000.
C) liabilites and equity by R$195,000.
D) assets and equity by R$195,000.

Accepted Answer

The answer of Gafisa Inc. performed services for R$195,000. The...

Question 6

As of December 31, 2014, Lojas Company reported assets of R$7,400,000, liabilities of R$2,200,000, share capital of R$1,980,000 and retained earnings of R$3,220,000. Total equity reported on the statement of financial position as of that date is
A) R$1,240,000.
B) R$5,200 000.
C) R$5,400 000.
D) R$7,400.000.

Accepted Answer

The answer of As of December 31, 2014, Lojas Company...

Question 7

Burgundy Inc. purchased supplies on account for €26,000. This transaction will
A) increase liabilities and decrease equity by €26,000.
B) increase assets and decrease equity by €26,000.
C) increase assets and increase liabilities by €26,000.
D) have no effect on the accounting equation.

Accepted Answer

The purchase of supplies on account increases the assets (supplies) by €26,000 and increases liabilities (accounts payable) by €26,000. Therefore, the accounting equation is balanced and the transaction has no effect on equity.

Question 8

A payment on account decreases
A) assets and equity.
B) liabilities and equity.
C) assets and liabilities.
D) assets, liabilities and equity.

Accepted Answer

The answer of A payment on account decreases
A) assets and...

Question 9

On January 11, 2014, Britannica Corporation sold ordinary shares to investors for ₤6,550,000. This transaction will increase assets and
A) decrease liabilities by ₤6,550,000.
B) decrease equity by ₤6,550,000.
C) increase revenues by ₤6,550,000.
D) increase equity by ₤6,550,000.

Accepted Answer

The sale of ordinary shares to investors is a form of equity financing, which increases the company's equity. Therefore, the correct choice is D - increase equity by ₤6,550,000.

Question 10

On February 1, Potter Company paid £900 for advertisements to run during the month of February. This transaction will
A) decrease Cash and increase Advertising Expense by £900.
B) increase Advertising Expense and increase Accounts Payable by £900.
C) decrease Accounts Payable and decrease Cash by £900.
D) decrease Cash and decrease Advertising Expense by £900.

Accepted Answer

The payment of £900 for advertisements is a cash expense for the company and should be recorded as a decrease to Cash. Additionally, the expense is incurred for advertising, so it should be recorded as an increase to Advertising Expense. Therefore, option A is the correct answer. Option B is not correct because it records the payment as an increase to Accounts Payable, which is incorrect since the payment has already been made. Option C is also incorrect because it records a decrease to Accounts Payable when no such decrease is necessary. Option D is not correct because it records a decrease to Advertising Expense when the company has actually incurred an expense for advertising.

Question 11

As of December 31, 2014, Deitrich Inc. had assets of €13,050,000, liabilities of €4,650,000, share capital of ₤3,300,000 and retained earnings of €5,100,000. Total equity as of that date is
A) €3,300,000.
B) €3,750,000.
C) €8,400,000.
D) €13,050,000.

Accepted Answer

The answer of As of December 31, 2014, Deitrich Inc....

Question 12

An investment of cash by an owner of a business increases assets and
A) increases liabilities.
B) increases equity.
C) decreases equity.
D) decreases liabilities.

Accepted Answer

When the owner of a business invests cash into the business, it increases the assets of the business (cash). At the same time, since the owner is providing the cash as capital, it increases the equity of the business. Therefore, the correct answer is B - increases equity. It does not affect liabilities, so A and D are not correct, and it does not decrease equity, so C is not correct.

Question 13

On June 6, Wing Wah Inc. purchased supplies on account for HK$60,000. On June 30, the company paid half of the balance due. The June 30 payment will
A) decrease Cash and increase Supplies Expense by HK$ 60,000.
B) increase Cash and decrease Accounts Receivable by HK$30,000.
C) decrease Cash and decrease Accounts Payable by HK$30,000.
D) decrease Supplies and increase Supplies Expense by HK$30,000.

Accepted Answer

The payment made on June 30 will decrease the company's cash balance and decrease its accounts payable balance. The supplies purchased on account will have already been recorded as an increase in the supplies expense account at the time of purchase. None of the other choices accurately reflect the effect of the payment on the company's financial statements.

Question 14

McDonagal Inc. sold ordinary shares for £2,200,000. This transaction will increase
A) Cash and increase Retained Earnings by £2,200,000.
B) Cash and increase Share Capital by £2,200,000.
C) Service Revenue and increase Share Capital by £2,200,000.
D) Service Revenue and increase Cash by £2,200,000.

Accepted Answer

When a company sells ordinary shares, it increases its share capital. Therefore, the correct option is to increase cash and increase share capital by the same amount (£2,200,000). Option A is incorrect because Retained Earnings is not affected by the sale of shares. Option C is incorrect because the company did not generate service revenue from the sale of shares. Option D is incorrect because the sale of shares is not a service provided by the company.

Question 15

The purchase of supplies on account increases assets and
A) also decreases assets so there is no net change.
B) increases liabilities.
C) decreases equity.
D) increases equity.

Accepted Answer

When supplies are purchased on account, it increases the assets (supplies), but at the same time, it also increases the liabilities (accounts payable) because the amount is owed to the supplier. Therefore, there is a net increase in the liabilities.

Question 16

On November 4, Vivo Company performed services on account for R$295,000. On November 26, the company collected the balance due. The November 26 transaction will increase
A) Cash and Accounts Payable by R$295,000.
B) Accounts Receivable and Service Revenue by R$295,000
C) Cash and decrease Accounts Receivable by R$295,000
D) Service Revenue and decrease Accounts Receivable by R$295,000.

Accepted Answer

When services are performed on account, it increases Accounts Receivable and Service Revenue. When the company collected the balance due, it means they received cash and therefore decreased Accounts Receivable. Therefore, the transaction will increase Cash and decrease Accounts Receivable by the same amount of R$295,000. Choice C correctly reflects this transaction.

Question 17

As of December 31, 2014, Oxford-welsh Inc. had assets of ₤6,520,000, liabilities of ₤1,980,000, and share capital of ₤2,820,000. Retained earnings as of that date are
A) ₤1,720,000.
B) ₤3,700,000.
C) ₤4,540,000.
D) ₤6,520,000.

Accepted Answer

The answer of As of December 31, 2014, Oxford-welsh Inc....

Question 18

The accounting equation for Gudgeyes Enterprises is as follows: 
If Gudgeyes purchases office equipment on account for $12,000, the accounting equation will change to
&ensp;&ensp;Assets &ensp;&ensp;&ensp;&ensp;Liabilities &ensp;&ensp;Equity
A) $140,000 = $60,000 + $80,000
B) $152,000 = $60,000 + $92,000
C) $152,000 = $76,000 + $76,000
D) $152,000 = $72,000 + $80,000

Accepted Answer

The answer of The accounting equation for Gudgeyes Enterprises is...

Question 19

Bennoit Corporation paid dividends totaling €295,000 to its shareholders. This transaction will decrease assets and
A) decrease equity by €295,000.
B) decrease liabilities by €295,000.
C) increase expenses by €295,000.
D) have no effect on the accounting equation.

Accepted Answer

The payment of dividends will decrease the assets of the company by the amount paid out (€295,000) as it is a cash outflow. As dividends are paid out of retained earnings, which is a component of equity, the payment will also decrease equity by the same amount (€295,000). Therefore, the correct answer is A.

Question 20

As of June 30, 2014, Dallas Company has assets of $140,000 and equity of $10,000. What are the liabilities for Dallas Company as of June 30, 2014?
A) $150,000
B) $120,000
C) $130,000
D) $140,000

Accepted Answer

Assets = Liabilities + Equity, so Liabilities = Assets - Equity. Plugging in the numbers, we get: Liabilities = $140,000 - $10,000 = $130,000.

Quiz 1: Accounting in Action

Vita Corporation performed services on account for €22,000. This transaction will

Freirs Company paid the monthly rent of €6,000. This transaction will

As of December 31, 2014, Thames Company reported assets of ₤6,480,000, liabilities of ₤1,920,000 and retained earnings of ₤3,315,000. Share capital reported on the December 31, 2014 statement of financial position is

Sao Paulo Company performed services on account for R$160,000. This transaction will

Gafisa Inc. performed services for R$195,000. The company collected R$65,000 in cash. The balance will be collected in 30 days. Performing services for R$195,000 will increase

As of December 31, 2014, Lojas Company reported assets of R$7,400,000, liabilities of R$2,200,000, share capital of R$1,980,000 and retained earnings of R$3,220,000. Total equity reported on the statement of financial position as of that date is

Burgundy Inc. purchased supplies on account for €26,000. This transaction will

A payment on account decreases

On January 11, 2014, Britannica Corporation sold ordinary shares to investors for ₤6,550,000. This transaction will increase assets and

On February 1, Potter Company paid £900 for advertisements to run during the month of February. This transaction will

As of December 31, 2014, Deitrich Inc. had assets of €13,050,000, liabilities of €4,650,000, share capital of ₤3,300,000 and retained earnings of €5,100,000. Total equity as of that date is

An investment of cash by an owner of a business increases assets and

On June 6, Wing Wah Inc. purchased supplies on account for HK$60,000. On June 30, the company paid half of the balance due. The June 30 payment will

McDonagal Inc. sold ordinary shares for £2,200,000. This transaction will increase

The purchase of supplies on account increases assets and

On November 4, Vivo Company performed services on account for R$295,000. On November 26, the company collected the balance due. The November 26 transaction will increase

As of December 31, 2014, Oxford-welsh Inc. had assets of ₤6,520,000, liabilities of ₤1,980,000, and share capital of ₤2,820,000. Retained earnings as of that date are

The accounting equation for Gudgeyes Enterprises is as follows: If Gudgeyes purchases office equipment on account for $12,000, the accounting equation will change to Assets Liabilities Equity

Bennoit Corporation paid dividends totaling €295,000 to its shareholders. This transaction will decrease assets and

As of June 30, 2014, Dallas Company has assets of $140,000 and equity of $10,000. What are the liabilities for Dallas Company as of June 30, 2014?