Question

1. If total liabilities increased by $42,000 during a period of time and total assets decreased by $18,000 during the same period, then the amount and direction (increase or decrease) of the period's change in total equity is a(n)

Select one:

a. $60,000 decrease

b. $60,000 increase

c. $24,000 decrease

d. $24,000 increase

8. Mitchell Corporation bought equipment on January 1, 2022. The equipment cost $120,000 and had an expected salvage value of $20,000. The life of the equipment was estimated to be 6 years. Straight-line depreciation was used

The book value of Mitchell's equipment at the beginning of the third year would be:

Select one:

a. $120,000

b. $100,000

c. $86,667

d. $33,333

e. $66,667

9. If Laron Corporation has 80,000 shares of common stock unissued, 50,000 shares of common stock issued, and holds 12,000 shares of common stock as treasury stock, the total number of authorized shares of Laron Corporation amounts to:

Select one:

a. 130,000

b. 118,000

c. 38,000

d. 68,000

e. 42,000

Answer 1

1.

Increase in liabilities = $42,000

Decrease in assets = $18,000

Decrease in equity = Increase in liabilities + Decrease in assets

= 42,000 + 18,000

= $60,000

Correct option is (a)

8.

Annual depreciation expense = (Cost of equipment - Salvage value)/Useful life

= (120,000 - 20,000)/6

= $16,666.67

Accumulated depreciation for 2 years = Annual depreciation expense x 2

= 16,666.67 x 2

= $33,333

The book value of Mitchell's equipment at the beginning of the third year would be = Cost of equipment - Accumulated depreciation for 2 years

= 120,000 - 33,333

= $86,667

Correct option is (c)

9.

Total number of authorized shares of Laron Corporation amounts to = Number of shares of common stock unissued + Number of shares of common stock issued

= 80,000 + 50,000

= 130,000

Correct option is (a)