name money instructor date b. a liability. c. an asset. d. owners equity. 10. cars galore pays their account…

name money instructor date b. a liability. c. an asset. d. owners equity. 10. cars galore pays their account with the local office supply store. what effect does this transaction have on the accounting equation? a. increase an asset, increase a liability b. decrease an asset, decrease a liability c. decrease an asset, decrease owners equity d. increase one asset and decrease another asset 11. when cars galore pays its employees their monthly commission, what effect does this transaction have on the accounting equation? a. increase an asset, increase a liability b. decrease an asset, increase a liability c. increase an asset, decrease a liability d. decrease an asset, decrease owners equity 12. a company buys a $25,000 truck with $5000 down and the remainder as a loan. what is the effect on the accounting equation? a. assets increase $25,000 b. liabilities increase $25,000 c. assets increase $5000 d. assets increase $20,000 13. cash dividends are declared and paid to the stockholders of the corporation. how will this transaction affect the components of the accounting equation? a. decrease an asset, decrease equity b. decrease an asset, increase a liability c. increase an asset, increase equity d. increase one asset and decrease another asset 14. purchasing supplies for cash will have what effect on the components of the accounting equation? a. increase cash and decrease equity b. increase cash and increase supplies c. increase one asset and decrease another d. increase an asset and increase equity 15. you are given the following information: assets = $16,000, revenues = $5800, expenses = $2250, and there have been no drawings for the period. what is the effect on owners equity? a. it increases by $5800 b. it increases by $2250 c. it increases by $3550 d. it equals $12,450

name money instructor date b. a liability. c. an asset. d. owners equity. 10. cars galore pays their account with the local office supply store. what effect does this transaction have on the accounting equation? a. increase an asset, increase a liability b. decrease an asset, decrease a liability c. decrease an asset, decrease owners equity d. increase one asset and decrease another asset 11. when cars galore pays its employees their monthly commission, what effect does this transaction have on the accounting equation? a. increase an asset, increase a liability b. decrease an asset, increase a liability c. increase an asset, decrease a liability d. decrease an asset, decrease owners equity 12. a company buys a $25,000 truck with $5000 down and the remainder as a loan. what is the effect on the accounting equation? a. assets increase $25,000 b. liabilities increase $25,000 c. assets increase $5000 d. assets increase $20,000 13. cash dividends are declared and paid to the stockholders of the corporation. how will this transaction affect the components of the accounting equation? a. decrease an asset, decrease equity b. decrease an asset, increase a liability c. increase an asset, increase equity d. increase one asset and decrease another asset 14. purchasing supplies for cash will have what effect on the components of the accounting equation? a. increase cash and decrease equity b. increase cash and increase supplies c. increase one asset and decrease another d. increase an asset and increase equity 15. you are given the following information: assets = $16,000, revenues = $5800, expenses = $2250, and there have been no drawings for the period. what is the effect on owners equity? a. it increases by $5800 b. it increases by $2250 c. it increases by $3550 d. it equals $12,450

Answer

Brief Explanations:

  1. Paying an account payable decreases cash (an asset) and decreases the liability. So the answer is b.
  2. Paying employee commission decreases cash (an asset) and also decreases owner's equity as it is an expense. So the answer is d.
  3. Buying a truck increases the asset (truck) by $25,000. The down - payment and loan details are just how the purchase is financed. So assets increase by $25,000. The answer is a.
  4. Paying cash dividends decreases cash (an asset) and also decreases equity as it is a distribution of earnings. The answer is a.
  5. Purchasing supplies for cash is an exchange of one asset (cash) for another asset (supplies). So it increases one asset and decreases another. The answer is c.
  6. Using the accounting equation: Owner's Equity = Assets + Revenues - Expenses. Substituting the values: $16,000 + $5,800 - $2,250=$19,550. But if we assume the question is asking for the change in owner's equity due to revenues and expenses only (since assets are given as a starting point), the change is $5,800 - $2,250 = $3,550 increase. So the answer is c.

Answer:

  1. b. Decrease an asset, decrease a liability
  2. d. Decrease an asset, decrease owner's equity
  3. a. Assets increase $25,000
  4. a. Decrease an asset, decrease equity
  5. c. Increase one asset and decrease another
  6. c. It increases by $3550