Question 1

If total liabilities decreased by ¥30,000 and equity decreased by ¥10,000 during a period of time, then total assets must change by what amount and direction during that same period?

Accepted Answer

The answer of If total liabilities decreased by ¥30,000 and...

Question 2

Equity can be described as

Accepted Answer

Equity represents the ownership claim on total assets, meaning the amount of assets that belong to the shareholders of a company after all debts and liabilities are subtracted.

Question 3

If total liabilities decreased by ¥30,000 and equity increased by ¥10,000 during a period of time, then total assets must change by what amount and direction during that same period?

Accepted Answer

According to the accounting equation (Assets = Liabilities + Equity), if liabilities decrease by ¥30,000 and equity increases by ¥10,000, the net effect is a decrease in assets by ¥20,000.

Question 4

If total liabilities increased by ¥21,000 during a period of time and equity decreased by ¥9,000 during the same period, then the amount and direction of the period's change in total assets is a(n)

Accepted Answer

According to the accounting equation (Assets = Liabilities + Equity), if liabilities increase by ¥21,000 and equity decreases by ¥9,000, the net effect on assets is an increase of ¥12,000 (¥21,000 - ¥9,000).

Question 5

As of December 31, 2011, Dolce & Gabanna Inc.had assets of €5,700,000, share capital of €2,100,000 and retained earnings of €2,400,000.Total liabilities as of that date are

Accepted Answer

Total liabilities = Assets - (Share Capital + Retained Earnings)
Total liabilities = €5,700,000 - (€2,100,000 + €2,400,000) = €1,200,000.

Question 6

Revenues would not result from

Accepted Answer

Revenues are generated from the company's primary operations such as the sale of merchandise or performance of services. Issuance of common stock is a form of financing and does not result in revenues. Rental of property may result in rental income which is a form of revenue.

Question 7

The basic accounting equation cannot be restated as

Accepted Answer

The answer of The basic accounting equation cannot be restated...

Question 8

Liabilities of a company are owed to

Accepted Answer

Liabilities of a company refer to the obligations or debts that a company owes to outside parties, such as lenders, suppliers, and other creditors. Therefore, the correct choice is C, that is, liabilities are owed to creditors. A) Debtors are individuals or entities that owe money to a company. B) Benefactors are individuals or organizations that provide financial or other support to a company. D) Underwriters are individuals or companies that assume some responsibility for a company's financial obligations or risks.

Question 9

If total liabilities increased by ¥30,000 and equity increased by ¥10,000 during a period of time, then total assets must change by what amount and direction during that same period?

Accepted Answer

The accounting equation states that assets = liabilities + equity. If liabilities increase by ¥30,000 and equity increases by ¥10,000, then assets must increase by ¥40,000 to maintain the equation.

Question 10

All of the following transactions increase revenue except the

Accepted Answer

The sale of additional ordinary shares by British Airways is a financing activity, not a revenue-generating activity. The sale of clothing by French Connection, performance of accounting services by PricewaterhouseCoopers, and sale of petroleum by Royal Dutch Shell are all examples of revenue-generating activities.

Question 11

The equity section of a statement of financial position has two components:

Accepted Answer

The equity section of a statement of financial position includes the amount of capital contributed by shareholders (share capital) and the net profits earned by the company but not yet distributed to shareholders (retained earnings). Therefore, the correct answer is C - share capital and retained earnings.

Question 12

A dividend is

Accepted Answer

A dividend is a distribution of the company's earnings to its stockholders. This means that a portion of the profits that a company earns is given to its shareholders as a reward for investing in the company.

Question 13

Sources of increases to equity are

Accepted Answer

Sales of shares are a direct source of increases to equity, as they represent an infusion of capital into the business from shareholders. Purchases of merchandise and expenses do not directly increase equity, and dividends are a distribution of profits rather than an increase to equity.

Question 14

Equity is often referred to as

Accepted Answer

Equity is often referred to as residual equity because it represents what is left over for the owners of a company after all debts and other obligations have been paid. It is not simply "leftovers" or "spoils", but rather a calculation of the net value of a company's assets minus its liabilities. "Second equity" is not a commonly used term and is not an accurate description of what equity represents.

Question 15

The retained earnings section of the statement of financial position is determined by

Accepted Answer

The answer of The retained earnings section of the statement...

Question 16

On its December 31, 2011 statement of financial position, Adaro Corporation reported liabilities of Rp2,566,000,000, share capital of Rp1,331,000,000 and retained earnings of Rp2,101,000,000.Total assets as of December 31, 2011 are

Accepted Answer

Total assets are calculated by adding liabilities, share capital, and retained earnings: Rp2,566,000,000 + Rp1,331,000,000 + Rp2,101,000,000 = Rp5,998,000,000.

Question 17

When assets are distributed to the shareholders of a corporation, these distributions are termed

Accepted Answer

When assets are distributed to the shareholders of a corporation, these distributions are termed dividends. Depletions and consumptions are not relevant terms in this context, and a credit line refers to a form of borrowing rather than a distribution of assets to shareholders.

Question 18

If total liabilities decreased by ¥25,000 and equity increased by ¥5,000 during a period of time, then total assets must change by what amount and direction during that same period?

Accepted Answer

According to the accounting equation, Assets = Liabilities + Equity. If liabilities decrease by ¥25,000 and equity increases by ¥5,000, the net effect is a ¥20,000 decrease in total assets.

Question 19

A company increases its share capital by

Accepted Answer

Share capital is increased by selling shares to investors. This is because share capital represents the amount of money invested by shareholders in the company in exchange for ownership rights through shares of stock. Performing services for cash or selling goods on account would not increase share capital, and paying dividends to shareholders would only distribute a portion of the company's profits to them without increasing the amount of capital invested in the company.

Question 20

Equity is decreased by all of the following except

Accepted Answer

Equity is the residual interest of the owners in the assets of a company after deducting liabilities. The equity is decreased by dividends, expenses, and net losses because these reduce the company's assets, which in turn reduce the owners' residual interest. However, the sale of shares increases equity because it means the owners are contributing more capital, which increases the amount of assets available to the company. Therefore, option A is the correct answer as the sale of shares increases equity.

Quiz 1: Accounting in Action