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The grid below is a list of possible effects on the Income Statement and the Balance Sheet. The code is + = increase, - =

The grid below is a list of possible effects on the Income Statement and the Balance Sheet. The code is + = increase, - = decrease, NE = no effect

Revenue/Gain Expense/Loss Net Income Assets Liability Equity
a. NE +20 -20 -20 NE -20
b. NE +100 -100 -100 NE -100
c. NE +20 -20 NE +20 -20
d. NE NE NE NE NE NE
e. NE +5 -5 -5 NE -5

Match the effect that the transaction below has on a company's Income Statement and Balance Sheet. Choose (a) (b) (c) (d) or (e) from the grid above. For example, if the transaction is "Collected cash on accounts receivable", the correct answer is (d) because there is no effect on revenue, expense, net income, overall assets, liabilities, or equity.

Transaction: On 12/31, recorded one year of amortization expense on a purchased patent that cost $100. The patent has a legal life of 20 years and an economic life of 5 years note. NOTE: This question is only asking for the effect of recording amortization expense (not the purchase of the patent).

a

b

c

d

e

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