Question : 141.Alpha Company has assets of $600,000, liabilities of $250,000, and : 1258291

 

 

141.Alpha Company has assets of $600,000, liabilities of $250,000, and equity of $350,000. It buys office equipment on credit for $75,000. What would be the effects of this transaction on the accounting equation?   

A.Assets increase by $75,000 and expenses increase by $75,000.

 

B.Assets increase by $75,000 and expenses decrease by $75,000.

 

C.Liabilities increase by $75,000 and expenses decrease by $75,000.

 

D.Assets decrease by $75,000 and expenses decrease by $75,000.

 

E.Assets increase by $75,000 and liabilities increase by $75,000.

Assets = Liabilities + Stockholders’ Equity$600,000 = $250,000 + $350,000Assets increase by $75,000 (Equipment) due to the purchase.Liabilities also increase by $75,000 (Accounts Payable) due to the purchase on credit.

 

 

 

142.Contessa Company collected $42,000 cash on its accounts receivable. The effects of this transaction as reflected in the accounting equation are:   

A.Total assets decrease and equity increases.

 

B.Both total assets and total liabilities decrease.

 

C.Neither assets, total liabilities, nor equity are changed.

 

D.Both total assets and equity are unchanged and liabilities increase.

 

E.Total assets increase and equity decreases.

 

 

 

 

143.If the liabilities of a business increased $75,000 during a period of time and the stockholders’ equity in the business decreased $30,000 during the same period, the assets of the business must have:   

A.Decreased $105,000.

 

B.Decreased $45,000.

 

C.Increased $30,000.

 

D.Increased $45,000.

 

E.Increased $105,000.

Assets = Liabilities + Stockholders’ EquityChange in Assets = Change in Liabilities + Change in Stockholders’ EquityChange in Assets = Increase of $75,000 + Decrease of $30,000Change in Assets = Increase of $45,000

 

 

 

144.If the assets of a business increased $89,000 during a period of time and its liabilities increased $67,000 during the same period, equity in the business must have:   

A.Increased $22,000.

 

B.Decreased $22,000.

 

C.Increased $89,000.

 

D.Decreased $156,000.

 

E.Increased $156,000.

Assets = Liabilities + Stockholders’ EquityChange in Assets = Change in Liabilities + Change in Stockholders’ EquityIncrease of $89,000 = Increase of $67,000 + Change in Stockholders’ EquityChange in Stockholders’ Equity = Increase of $22,000

 

 

 

145.If the liabilities of a company increased $74,000 during a period of time and equity in the company decreased $19,000 during the same period, what was the effect on the assets?   

A.Assets would have increased $55,000.

 

B.Assets would have decreased $55,000.

 

C.Assets would have increased $19,000.

 

D.Assets would have decreased $19,000.

 

E.None of these.

Assets = Liabilities + Stockholders’ EquityChange in Assets = Change in Liabilities + Change in Stockholders’ EquityChange in Assets = Increase of $74,000 + Decrease of $19,000Change in Assets = Increase of $55,000

 

 

 

146.If a company paid $38,000 of its accounts payable in cash, what was the effect on the accounting equation?   

A.Assets would decrease $38,000, liabilities would decrease $38,000, and equity would decrease $38,000.

 

B.Assets would decrease $38,000, liabilities would decrease $38,000, and equity would increase $38,000.

 

C.Assets would decrease $38,000 and liabilities would decrease $38,000.

 

D.There would be no effect on the accounts because the accounts are affected by the same amount.

 

E.Assets would increase $38,000 and liabilities would decrease $38,000.

Assets = Liabilities + Stockholders’ EquityAssets will decrease by $38,000 in Cash due to the payment of the debt.Liabilities will decrease by $38,000 in Accounts payable due to the payment of the debt.Stockholders’ Equity would not be affected by this transaction.

 

 

 

147.If assets are $365,000 and equity is $120,000, then liabilities are:   

A.$120,000.

 

B.$245,000.

 

C.$365,000.

 

D.$485,000.

 

E.$610,000.

Assets = Liabilities + Stockholders’ Equity$365,000 = Liabilities + $120,000Liabilities = $245,000

 

 

 

148.Rushing had income of $150 million and average invested assets of $1,800 million. Its return on assets is:   

A.8.3%.

 

B.83.3%.

 

C.12%.

 

D.120%.

 

E.16.7%.

Return on Assets = Net Income/Average AssetsReturn on Assets = $150 million/$1,800 million = 0.833 = 8.3%

 

 

 

149.Cage Company had income of $350 million and average invested assets of $2,000 million. Its return on assets (ROA) is:   

A.1.8%.

 

B.35%.

 

C.17.5%.

 

D.5.7%.

 

E.3.5%.

Return on Assets = Net Income/Average AssetsReturn on Assets = $350 million/$2,000 million = 0.175 = 17.5%

 

 

 

150.Speedy has net income of $18,955, and assets at the beginning of the year of $200,000. Assets at the end of the year total $246,000. Compute its return on assets.   

A.7.7%.

 

B.8.5%.

 

C.9.5%.

 

D.11.8%.

 

E.13.0%.

Return on Assets = Net Income/Average AssetsReturn on Assets = $18,955/[($200,000 + $246,000)/2]Return on Assets = $18,955/$223,000 = 0.085 = 8.5%