Question 14

How would a purchase of inventory on credit affect the income statement?

		It would increase liabilities
		It would decrease retained earnings
		It would increase assets
		None of the above

Question 16

How would a sale of $400 of inventory on credit affect the balance sheet if the cost of the inventory sold was $160?

		It would increase noncash assets by $400 and increase equity by $400
		It would decrease noncash assets by $160 and decrease equity by $160
		It would increase cash by $400 and increase equity by $400
		Both the first and the second choices, above happen simultaneously

Question 20

On January 1, Fey Properties collected $7,200 for six months rent in advance from a tenant renting an apartment. Fey Company prepares monthly financial statements.

Which of the following describes the required adjusting entry on January 31?

		Debit Cash for $7,200 and Credit Rent revenue for $7,200
		Debit Unearned rent revenue for $1,200 and Credit Rent revenue for $1,200
		Debit Rent revenue for $1,200 and Credit Unearned rent revenue for $1,200
		Debit Cash for $6,000 and Credit Unearned rent revenue for $6,000