Multiple Choice Questions

1. What is the effect on total assets and stockholders equity of paying the telephone bill as soon as it is received each month?

Total assets Stockholders equity

a. No effect No effect

b. Decrease No effect

c. No effect Decrease

d. Decrease Decrease

2. Which of the following transactions will increase an asset and increase a liability?

a. Purchasing office equipment for cash

b. Issuing stock

c. Payment of an account payable

d. Buying equipment on account

3. Which of the following transactions will increase an asset and increase stockholders equity?

a. Borrowing money from a bank

b. Purchasing supplies on account

c. Performing a service on account for a customer

d. Collecting cash from a customer on an account receivable

4. Where do we first record a transaction?

a. Journal

b. Trial balance

c. Account

d. Ledger

5. Which of the following is not an asset account?

a. Salary Expense

b. Service Revenue

c. Common Stock

d. None of the above accounts is an asset.

6. Which statement is false?

a. Assets are increased by debits.

b. Revenues are increased by credits.

c. Liabilities are decreased by debits.

d. Dividends are increased by credits.

7. The journal entry to record the receipt of land and a building and issuance of common stock

a. Debits Land and credits Common Stock.

b. Debits Land and Building and credits Common Stock.

c. Debits Land, Building, and Common Stock.

d. Debits Common Stock and credits Land and Building.