The following single question has five parts: What impact does each of the follo
ID: 2417378 • Letter: T
Question
The following single question has five parts:
What impact does each of the following transactions have on the financial statements?
Question 1: Paid rent for the current month.
Net income goes down; assets and stockholders'equity both go down.
Net income goes down; assets and liabilites both go down.
Net income goes down; liabilites go up and stockholders' equity goes down.
No effect on net income; assets and stockholders' equity both go down.
No effect on net income; assets go down and liabilites go up.
Question 2: Purchase of equipment on account.
Net income goes down; assets and liabilities both go up.
Net income goes down; assets and stockholders' equity both go down.
Net income goes up; assets and liabilities both go up.
No effect on net income; assets and liabilities both go up.
No effect on net income; assets and stockholders' equity both go up.
Question 3: Performed services and billed a customer.
Net income goes up; assets go both up and down.
Net income goes up; assets and liabilites both go up.
Net income goes up; assets and stockholders' equity both go up.
No effect on net income; assets go both up and down.
No effect on net income; assets and liabilities both go up.
Question 4: Paid off an amount due to a creditor.
Net income goes up; assets and liabilities both go up.
Net income goes up; assets and liabilites both go down.
No effect on net income; assets and liabilities both go up.
No effect on net income; assets and stockholders' equity both go down.
No effect on net income; assets and liabilities both go down.
Question 5: Received utility bill for the current month; the bill will be paid next month.
Net income goes down; assets and liabilites both go up.
Net income goes down; assets and liabilites both go down.
Net income goes down; assets and stockholders' equity both go down.
Net income goes down; liabilities go up and stockholders' equity goes down.
No effect on net income; assets and liabilities both go up.
Explanation / Answer
Question 1: Paid rent for the current month.
Answer = Net income goes down; assets and stockholders'equity both go down.
rent is an expense, therfore net income goes down
paid rent, cash ( current asset) goes down and retained earning( stockholder's equity) also goes down
Question 2: Purchase of equipment on account.
Answer= No effect on net income; assets and liabilities both go up.
fixed assets increases by purchase of equipment and creditors/account payable also increase
Question 3: Performed services and billed a customer.
ANswer = Net income goes up; assets and stockholders' equity both go up.
performing service net income increases and debtors/account receivables also increases and retained earnings also increases
Question 4: Paid off an amount due to a creditor.
Answer= No effect on net income; assets and liabilities both go down.
paying creditor cash(asset) will reduce and creditors(laibility) also reduced
Question 5: Received utility bill for the current month; the bill will be paid next month.
Answer =Net income goes down; liabilities go up and stockholders' equity goes down.