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Exam 2: The Accounting Cycle: During the Period

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Question 71

True/False

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Purchasing office supplies on account causes assets to increase and liabilities to increase.

A) True
B) False

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Question 72

Multiple Choice

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Assume that cash is paid for rent to cover the next year.The appropriate debit and credit are:

A) Debit Rent Expense,credit Cash.
B) Debit Prepaid Rent,credit Rent Expense.
C) Debit Prepaid Rent,credit Cash.

D) A) and B)
E) None of the above

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Question 73

Multiple Choice

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Which of the following transactions causes a decrease in stockholders' equity?

Posting is the process of:

Revenues have the effect of increasing retained earnings.

Purchasing equipment using cash causes assets to increase.One asset goes up;another asset goes down.There is no change to total assets.

The general ledger includes all accounts used to record the company's transactions.

Internal transactions are events that affect the financial position of the company but do not include an exchange with a separate economic entity.Examples are using supplies on hand and earning revenues after having received cash in advance from a customer.