Question

QUESTION 47

1. If $10,200 of equipment are purchased on account, which of the following is true?

   	A.	Total assets are increased, and liabilities are decreased.
   	B.	None of the above.
   	C.	Total Retained Earnings is increased.
   	D.	Total owners’ equity is unchanged.
   	E.	Total assets and liabilities are increased.

2 points   

QUESTION 48

1. During 2016 Austin Company had a decrease in assets of $200 and a decrease in liabilities of $800. No additional shares of common stock were issued during 2016. Cash dividends declared and paid during 2016 were $100. If expenses for 2016 were $800, total revenues were:

   	A.	$1,300
   	B.	$1,200
   	C.	$700
   	D.	$800
   	E.	None of the above

Answer 1

Answer 1:

Option E: Total assets and liabilities are increased.

Explanation:

Entry for purchase of equipment would be:

Equipment account Dr.	$   -
To Supplier account		$   -

So, total assets (equipment) are increased, and total liability (supplier) is increased.

Hence, option 'E' is correct and rest all are incorrect.

Answer 2:

Option E: None of the above

Explanation:

Change in asset = Change in liabilities + Change in shareholders' funds

(200) = (800) + Change in shareholders' funds

Change in shareholders' funds = $ 600

Revenues (-) expenses (-) Dividends paid = Change in shareholders' funds

Revenues (-) 800 (-) 100 = $ 600

Revenues = $ 1,500

Hence, option 'E' is correct and rest all are incorrect.

In case of any doubt or clarification, feel free to come back via comments.