1. Which of the following are considered a decrease in cash (or cash availability)?

I. Common stocks increase. III. Accounts receivable increase.

II. Accounts payable decrease. IV. Inventory decreases.

A) I only C) II and III only

B) I and IV only D) I, II, and III only

2. Which of the following would be considered an increase in cash or cash availability?

I. Inventories increase. III. Accounts receivables decrease.

II. Common stocks increase. IV. Gross fixed assets increase.

A) II only C) II and III only

B) I and III only D) I, III, and IV only

3. The purchase of inventory on credit (increases, decreases) both accounts payable and inventory, which are balance sheet accounts. It would, therefore, have (no, a positive, a negative) effect on the income statement until it is sold.

4. Cash collected on accounts receivable produces (an increase, a decrease) in cash and (an increase, a decrease) in accounts receivable, so that there is (no, a positive, a negative) change in the asset accounts.

5 Which of the following accounts would not be involved in preparing the income statement?

A) Depreciation expense C) Accumulated depreciation

B) Accumulated retain earnings D) Retained earnings

E) B and C

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