Pt. 2

The accounting process begins with: a. Analysis of business transactions and source documents. b. Preparing financial statements and other reports. c. Summarizing the recorded effect of business transactions. d. Presentation of financial information to decision-makers. e. Preparation of the trial balance.

a. Analysis of business transactions and source documents.

Grandmark Printing pays $2,000 rent to the landlord of the building where its facilities are located. How does this transaction affect the accounting equation for Grandmark? a. Assets would decrease $2,000 and liabilities would decrease $2,000. b. Assets would decrease $2,000 and equity would decrease $2,000. c. Assets would increase $2,000 and equity would increase $2,000. d. Assets would increase $2,000 and liabilities would increase $2,000. e. Liabilities would decrease $2,000 and equity would increase $2,000.

b. Assets would decrease $2,000 and equity would decrease $2,000.

Photometer Company paid off $30,000 of its accounts payable in cash. What would be the effects of this transaction on the accounting equation? a. Assets, $30,000 increase; liabilities, no effect; equity, $30,000 increase. b. Assets, $30,000 decrease; liabilities, $30,000 decrease; equity, no effect. c. Assets, $30,000 decrease; liabilities, $30,000 increase; equity, no effect. d. Assets, no effect; liabilities, $30,000 decrease; equity, $30,000 increase. e. Assets, $30,000 decrease; liabilities, no effect; equity $30,000 decrease.

b. Assets, $30,000 decrease; liabilities, $30,000 decrease; equity, no effect.

If a company uses $1,300 of its cash to purchase supplies, the effect on the accounting equation would be: a. Assets increase $1,300 and liabilities decrease $1,300. b. One asset increases $1,300 and another asset decreases $1,300, causing no effect. c. Assets decrease $1,300 and equity decreases $1,300. d. Assets decrease $1,300 and equity increases $1,300. e. Assets increase $1,300 and liabilities increase $1,300.

b. One asset increases $1,300 and another asset decreases $1,300, causing no effect.

Atkins Company collected $1,750 as payment for the amount owed by a customer from services provided the prior month on credit. How does this transaction affect the accounting equation for Atkins? a. Assets would decrease $1,750 and liabilities would decrease $1,750. b. One asset would increase $1,750 and a different asset would decrease $1,750, causing no net change in the accounting equation. c. Assets would increase $1,750 and equity would increase $1,750. d. Assets would increase $1,750 and liabilities would increase $1,750. e. Liabilities would decrease $1,750 and equity would increase $1,750.

b. One asset would increase $1,750 and a different asset would decrease $1,750, causing no net change in the accounting equation.

The accounting equation for Long Company shows an increase in its assets and an increase in its liabilities. Which of the following transactions could have caused that effect? a. Cash was received from providing services to a customer. b. Cash was received as an owner investment. c. Equipment was purchased on credit. d. Supplies were purchased for cash. e. Advertising expense for the month was paid in cash.

c. Equipment was purchased on credit.

How would the accounting equation of Boston Company be affected by the billing of a client for $10,000 of consulting work completed? a. +$10,000 accounts receivable, -$10,000 accounts payable. b. +$10,000 accounts receivable, +$10,000 accounts payable. c. +$10,000 accounts receivable, +$10,000 cash. d. +$10,000 accounts receivable, +$10,000 revenue. e. +$10,000 accounts receivable, -$10,000 revenue.

d. +$10,000 accounts receivable, +$10,000 revenue.

If a company purchases equipment costing $4,500 on credit, the effect on the accounting equation would be: a. Assets increase $4,500 and liabilities decrease $4,500. b. Equity decreases $4,500 and liabilities increase $4,500. c. Liabilities decrease $4,500 and assets increase $4,500. d. Assets increase $4,500 and liabilities increase $4,500. e. Equity increases $4,500 and liabilities decrease $4,500.

d. Assets increase $4,500 and liabilities increase $4,500.

Billington Corp. borrows $80,000 cash from Second National Bank. How does this transaction affect the accounting equation for Billington? a. Assets would decrease $80,000 and liabilities would decrease $80,000. b. Assets would decrease $80,000 and equity would increase $80,000. c. Assets would increase $80,000 and equity would decrease $80,000. d. Assets would increase $80,000 and liabilities would increase $80,000. e. Liabilities would decrease $80,000 and equity would increase $80,000.

d. Assets would increase $80,000 and liabilities would increase $80,000.

If Houston Company billed a client for $10,000 of consulting work completed, the accounts receivable asset increases by $10,000 and: a. Accounts payable decreases $10,000. b. Accounts payable increases $10,000. c. Cash increases $10,000. d. Revenue increases $10,000. e. Revenue decreases $10,000

d. Revenue increases $10,000.

The accounting equation for Ying Company shows a decrease in its assets and a decrease in its equity. Which of the following transactions could have caused that effect? a. Cash was received from providing services to a customer. b. The company paid an amount due on credit. c. Equipment was purchased for cash. d. A utility bill was received for the current month, to be paid in the following month. e. Advertising expense for the month was paid in cash.

e. Advertising expense for the month was paid in cash.

If a company receives $12,000 from the owner to establish a proprietorship, the effect on the accounting equation would be: a. Assets decrease $12,000 and equity decreases $12,000. b. Assets increase $12,000 and liabilities decrease $12,000. c. Assets increase $12,000 and liabilities increase $12,000. d. Liabilities increase $12,000 and equity decreases $12,000. e. Assets increase $12,000 and equity increases $12,000.

e. Assets increase $12,000 and equity increases $12,000.