1. Barro Corporation received $50,000 cash invested by its owners. The effect on the fundamental accounting model was

A. assets and liabilities each increased by $50,000.

B. assets and revenues each increased by $50,000.

C. stockholders' equity and revenues each increased by $50,000.

D. stockholders' equity and assets each increased by $50,000.

2. M Corporation purchased a truck for $10,000 cash. Which of the following statements regarding this purchase is incorrect?

A. The net income for M will be reduced by the $10,000 expense of the truck.

B. The total amount of assets on M's balance sheet will not change.

C. The total liabilities will not change.

D. The amount of the stockholders' equity on M's balance sheet will not change.

3.Which of the following direct effects on the fundamental accounting equation is not possible as a result of transactional analysis?

A. An increase in an asset and a decrease in another asset.

B. A decrease in a liability and a decrease in an asset.

C. An increase in stockholders' equity and a decrease in an asset.

D. An increase in an asset and an increase in stockholders' equity.

4. Which of the following transactions will cause both the left and right side of the equation to increase?

A. We collect cash from a customer who owed us money

B. We pay a supplier for inventory we previously bought on account

C. We borrow money from the bank

D. We purchase equipment for cash

5. When a company buys equipment for $60,000 and pays for one third in cash and the other two thirds is financed by a note payable, the following are the effects on the equation

A. cash decreases by $20,000

B. equipment increases by $60,000

C. liabilities increase by $40,000

D. All of the above effects occur on the equation

6.Eros Bank, in deciding whether to make a loan to V Company, would be interested in the amount of liabilities V has on its balance sheet because

A. the liabilities represent resources that could be used to repay the loan.

B. if V already has many other obligations, it might not be able to repay the loan.

C. existing liabilities give an indication of how profitable V has been in the past.

D. Eros would be interested in the amount of V's assets but not the amount of

liabilities.

7.On the statement of cash flows, a company would report the purchase of machinery as cash used in

A. operating activities.

B. financing activities.

C. purchasing activities.

D. investing activities.

8.A company would report a net loss when

A. retained earnings decreased due to paying dividends to shareholders.

B. its assets decreased during an accounting period.

C. its liabilities increased during an accounting period.

D. its expenses exceeded its revenues for an accounting period.

9. The amount of rent expense reported on the income statement is

A. the amount of cash paid for rent in the current period.

B. the amount of cash paid for rent in the current period less any unpaid rent at the end of the period.

C. the amount of rent used up (incurred) in the current period to help generate revenue.

D. an increase in net income.

10.Michaels Company owes you $800 on account due within 15 days. Which of the following amounts on its balance sheet would help you to determine the likelihood that you will be paid in full and on time?

A. cash and accounts receivable.

B. cash and property and equipment.

C. cash and inventory.

D. contributed capital and retained earnings.