QUESTION 8 Which of the following statements best describes

QUESTION 8 Which of the following statements best describes the effects of recognizing sales revenue earned by a business? Assets increase only when cash sales are made. O B. Stockholders\' equity increases only when credit sales are made. C Assets and stockholders\' equity increase when either cash or credit sales are made. D Assets increase, but stockholders\' equity decreases, when either cash or credit sales are made. OE There will be no effect on the accounting equation unless cash sales are made

Solution

Question 8

Answer is option C

Assets and stockholders\' equity increase with either cash or credit sales are made.

In case of both cash or credit sales net income will increase which in turn will increase stockholders\' equity.

In case of credit sales, accounts receivable will increase which is an asset

In case of cash sales, cash will increase which is again is an asset.

Question 9

Answer is option E

False, false, false

- only adjusting entries affect both the both balance sheet and income statement not all accounting transactions.

- all economic events that are financial or monetary in nature requires journal entry.

- the equality of debits and credits in a trial balance does not ensure that all journal entries are correctly posted to the accounts because equality of debits and credits in a trial balance may due to two sided error in a trial balance.

Question 10

Answer is option D $500,000

Beginning balance of stockholders\' equity = Assets - liabilities

=500000-150000=350000

Ending balance of stockholders\' equity = beginning balance + additional capital + net income - dividends paid

=350000+50000+220000-120000=500000