1. How Does paying interest on a note that was NOT previously recorded affect the accouting equation?

a.increase assets and increase liabilites

b.increase liabilites and decrease equity

c.decrease liabilites and increase equity

d.decrease assets and decrease liabilities

e. decrease assets and decrease equity

2.Which of the following statements is incorrect?

a. The incurrence of routine repairs and maintenance costs is expensed on the income statement.

b. The depreciable cost of a fixed asset includes installation costs

c.IF a company sells a fixed asset for more than its book value, a gain is recognized

d. THe estimated amount that an assest can be sold for at the end of its useful life is called a residual value

e.Depreciation, as defined in financial accounting, refers to the decline in market value of a fixed asset