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1. Risdale Co. purchased $20,000 of inventory on account. As a result of this transuction: A. Assets would increase $20,000, Equity would decrease $20,000. B. Assets would increase $20,000, Liabilities would increase $20,000. C. Liabilities would increase $20,000, Equity would decrease $20,000. D. Assets, Liabilities, and Equity would increase $20,000. 2. If Varco’s Liabilities are $220,000, and Equity is $106,000, Assets are: A. $440,000. B. $326,000. C. $320,000. D. $114,000. 3. According to the accrual method of accounting, revenue is recognized: A. Only when cash is received from customers. B. When customers place orders. C. When products have been delivered, or services performed, and the right to collect cash is obtained from customers. D. When customers are billed All of the following would be classified as an operating activity on the Statement of Cash Flows, ying a loan from the bank. lecting cash from customers. e. Paying for advertisements in a local newspaper. D. Purchasing inventory for cash. 5. Vista View Co. paid salaries for October 2012. The effect of this transaction would be: LiabilitiesOwner’s Equity Increase A. Increase No Change B. No Change C. Increase Decrease No Change No Change Decrease Increase Decrease DIncrease
Expert Answer
As per AB policy, I am allowed to answer only the first 4 parts of a question so please ask other questions separately.
The answers are:
1. Option B since purchasing an inventory increases the inventory level which are assets and purchasing on account increases the liability. Hence option B.
2. Assets = equities – liabilities
= 220000-106000 = 114000
3. correct option should be C Since the revenue gets recognised when the services or products are delivered to customers.
4. Correct option is A since taking a loan from a bank is a financing activity.
