Question

1)

A company raises $100,000 cash by issuing common stock (CS). What is the effect of this transaction on the Balance Sheet?

A-- Liabilities Increase. Equity Increases.

B-- Assets Increase. Liabilities Increase.

C--Assets Increase. Revenue Increases.

D-- Assets Increase. Equity Increases.

2)

On May 1st Sarif Industries paid $24,000 to Detroit Realty for 6 months rent beginning June 1st. The company did the correct recording on May 1st. What is the effect of this transaction on the Balance Sheet?

A-- Assets Remain Unchanged

B-- Assets Decrease. Liabilities Decrease.

C-- Assets Increase. Liabilities Increase.

D-- Assets Decrease. Equity Decreases

3)

BellTower Company collected $13,000 in June of 2019 for 7 months of service which would take place from October of 2019 through April of 2020. What's the impact of Belltower's June collection of this money on the Balance Sheet?

A-- Increase Assets. Increase Liabilities

B-- Increase Assets. Increase Equity

C-- Increase Assets. Increase Expense..

D-- Increase Assets. Increase Revenue

4)

An Increase in an Asset account would also cause which of the following to occur?

A-- No other entry would occur

B-- A Decrease in Equity

C-- An Increase in Liabilities

D-- A Decrease in Liabilities

Answer 1

1)

Cash increase by $100,000. Common stock increase by $100,000.

Assets Increase. Equity Increases.

Option D.

2)

$24,000 is prepaid rent.

Cash reduced by $24,000. Prepaid expense increase by $24,000.

Both cash and prepaid expense are assets.

Assets Remain Unchanged

Option A.

3)

$13,000 increase in cash. $13,000 revenue is received in advance which is a liability.

Increase Assets. Increase Liabilities

Option A.

4)

Increase in asset will be debited, Credit will occur only when a liability increases.

An Increase in Liabilities

Option C.