Chapter 4 - Multiple Choice

Normal account balances are as follows: a. Cash, Accounts Receivable, and Service Revenues are debits. b. Interest Expense, Wages Payable, and Retained Earnings are credits. c. Merchandise Inventory, Cost of Goods Sold, Equipment are debits. d. Accumulated Depreciation, Cash, and Merchandise Inventory are debits. e. None of the above.

C. Merchandise Inventory, Cost of Goods Sold, Equipment are debits.

Comparison of the balance sheet of Kohl Company at the end of 2011 with its balance sheet at the end of 2010 showed that total assets had decreased by $34,500 and owner's equity had increased by $7,500. The change in liabilities during the year was... a. a decrease of $42,000. b. an increase of $27,000. c. a decrease of $27,000. d. an increase of $24,000. e. None of the above.

a. a decrease of $42,000.

Which of the following groups of accounts all have debit balances? a. Land, Equipment, and Paid-In Capital b. Accounts Receivable, Merchandise Inventory, and Salary Expense. c. Notes Receivable, Dividends Payable, and Interest Expense. d. Accounts receivable, Accumulated Depreciation, and Buildings. e. None of the above.

b. Accounts Receivable, Merchandise Inventory, and Salary Expense.

Which of the following is NOT a correct expression of the accounting equation? a. Assets = Liabilities + Owners' Equity b. Assets = Liabilities - Owners' Equity c. Assets = Liabilities + Paid-In Capital + Retained Earnings d.Assets = Liabilities + Paid-In Capital + Revenues - Expenses e. Assets - Liabilities = Owners' Equity

b. Assets = Liabilities - Owners' Equity

Which of the following is NOT an example of a source document? a. Purchase invoice. b. Chat of accounts. c. Cash register tape printout. d. Receipt from sales register at the point of purchase. e. Check stub.

b. Chart of accounts

Credits are used to record... a.decrease to assets and increases to expenses, liabilities, revenues, and owners' equity. b. decreases to assets and expenses and increases to liabilities, revenues, and owners' equity. c. increase to assets and decreases to expenses, liabilities, and owners' equity. d. increases to assets and expenses and decreases to revenues, liabilities, and owners' equity. e. decreases to assets and owners' equity and increases to liabilities, expenses, and revenues.

b. decreases to assets and expenses and increases to liabilities, revenues, and owners' equity.

Which of the following transactions resulted in a $35,000 increase in assets and a $35,000 increase in liabilities? a. Collected accounts receivable of $35,000. b. Paid accounts payable of $35,000. c. Purchased land for $50,000, paying $15,000 in cash as a down payment and signing a note payable for the balance. d. Purchased on account, and used, $35,000 worth of office supplies during the period. e. Reclassified a $35,000 account receivable as a note when the customer failed to pay on time.

c. Purchased land for $50,000, paying $15,000 in cash as a down payment and signing a note payable for the balance.

If equipment is acquired by paying $12,000 in cash and issuing a $7,000 note payable. a. total assets are decreased by $12,000. b. total assets are increased by $19,000. c. total assets are increased by $7,000. d. total owners' equity is decreased by $12,000. e. total owners' equity is decreased by $7,000.

c. total assets are increased by $7,000.

Total assets remain the same when... a. depreciation expense is recorded. b. common stock is issued for cash. c. an account payable is paid to a creditor. d. an account receivable is reclassified as a note receivable. e. dividends are paid to common stockholders.

d. an account receivable is reclassified as a note receivable.

Retained Earning is not...

decreased by gains and loses.