21.At the end of an accounting period, the amount of net income earned by a company is transferred to the balance sheet and reported under which one of the following categories?
a.owners' equity
b.liabilities
c.assets
d.all of the above
22.Which of the following is not an asset?
a.inventory
b.contributed capital
c.equipment
d.furniture
23.The Fast Freight Company purchased a new delivery truck by making a cash down payment and signing a note payable for the balance. How will assets, liabilities, and owners’ equity be affected by this transaction?
Assets Liabilities Equity
a.decreased increased no change
b.increased increased no change
c.increased decreased increased
d.no change increased decreased
e.no change decreased increased
24.Arch Company is a retailer. It sold goods to customers for cash, from its inventory. Which of the following effects would occur as part of this event?
An asset would An asset would
be decreased be increased
a.Yes Yes
b.Yes No
c.No Yes
d.No No
25.Lunar Company sold goods to customers from its inventory at a price greater than its cost. Which of the following effects would occur as part of this event?
Total assets Total owners
would increase equity would increase
a.No No
b.No Yes
c.Yes No
d.Yes Yes
26.Orlando owns a supper club and needed to obtain funds for the business. A bank loaned the supper club $20,000. Concerning the supper club, which of the following increased as a result of this loan?
a.owners' equity
b.liabilities
c.revenues
d.expenses
27.Which of the following events is properly classified as an investing activity?
a.purchase of equipment
b.borrowing money from creditors
c.selling goods to customers
d.running the factory
28.Which of the following is an operating activity?
a.purchase of equipment
b.payment of cash dividends
c.sale of equipment
d.purchase of inventory
29.What effect do revenues and expenses eventually have on Retained Earnings?
Revenues Expenses
a.decrease decrease
b.decrease increase
c.increase increase
d.increase decrease
30.Revenues are recorded when a business
a.creates resources by selling goods or services
b.borrows money
c.receives money from owners of the business
d.pays its employees