Question

1.

Phil Company with total assets of $40,000 borrows $10,000 from a finance company.

		Owners' equity is $10,000 more.
		Owners' equity is $10,000 less.
		Owners' equity is the same.
		Total assets are now $30,000.
		None of the above are correct.

Question 2.

Ken Enterprises collects $2,000 of its accounts receivable. Total assets are now:

		unchanged.
		$2,000 less.
		$2,000 greater.
		unchanged, but total assets are greater.
		unchanged, but total assets are less.

3.

If Cape Company pays $6,000 of the accounts payable:

		owners' equity increases.
		owners' equity remains the same.
		owners' equity decreases.
		total assets increase.
		none of the above.

4.

Land with a cost of $10,000 was sold for $2,000 cash and the balance of $8,000 to be received over the next three years. This transaction results in:

		an increase in total assets.
		a decrease in total assets.
		no change in total assets.
		None of the above.
		All of the above.

Answer 1

• [1]
  Correct Answer = Option #5: None of the above are correct.
  This is because, the result would be:
  Asset Increase by $ 10000,
  Liabilities increase by $ 10000
• [2]
  Correct Answer = Option #1: Total Assets will be UNCHANGED.
  This is because Increase in Assets (Cash) is EQUAL TO decrease in Asset (Accounts receivables).
• [3]
  Correct Answer = Option #5: None of the above.
  The correct result would be:
  Asset (Cash) Decreases by $ 6000 ,and
  Liability (Account payable) decreases by $ 6000
• [4]
  Correct Answer = Option #2: Decrease in Total Assets.
  This is because total Increase in Asset (Cash $ 2000) is LESS THAN total Decrease in Asset (Land $ 10000).