Multiple Choice

10) Your monthly payment to the bank is $1.000, of whch interest is $950 and principal is $50. After each payment is made, which of the following is true? a) Net worth decreases by $950 b) Decrease cash by $1000, decrease net worth by $1000 c) Decrease cash by $950, increase debt by $50 d) Decrease cash by $1000, increase net worth by $50 11) You own a house valued at $100.000 with an outstanding mortgage of $70,000. You pay your first month's installment of $900 ($700 interest and $200 principal). The correct entry should be: a) decrease cash by $900, decrease mortgage by $900 b) decrease cash by $900, decrease mortgage principal by $200, decrease net worth by $900 c) decrease cash by $900, decrease net worth by $900 d) decrease cash by $900, decrease mortgage principal by $200, increase interest expense by $700 12) Which of the following terms would not be used to classify the net worth of a business or government institution? a) Owner's Equity b) Stockholders' Equity c) Accumulated Surplus (Deficit) d) Net Income 13) How would buying an asset affect owner's equity? a) Buying an asset increases owner's equity b) Buying an asset decreases owner's equity c) Buying an asset has no impact on owner's equity d) It depends on the accounting policy chosen by the owner 14) A company prepays a 12-month insurance policy for $4,800 on December 31, 2018. The policy is in effect on January 1, 2018. How much will equity change by January 31, 2018 due to the insurance policy? a) $4,800 b) $4,400 c) $400 d) None of the choices 15) When your business pays back loan principal: a) the cash balance decreases and owner's equity decreases b) the cash balance decreases and owner's equity increases c) the cash balance decreases and there is no change to owner's equity d) the cash balance decreases and expenses increase