Which of the following statements is true? A. Dividends decrease net income. B.
ID: 2492180 • Letter: W
Question
Which of the following statements is true?
A. Dividends decrease net income.
B. Net income causes liabilities to decrease.
C. Assets will decrease by the amount of net loss.
D. Cash increases as net income increases.
E. None of these.
Amounts that must be left on deposit and cannot be withdrawn are known as:
A. compensating balances.
B. dead monies.
C. sinking funds.
D. demand deposits.
E. None of these.
Failure to record the purchase of office furniture on account will result in:
A. an overstatement of assets.
B. an understatement of liabilities.
C. an overstatement of stockholders' equity.
D. All of these.
E. None of these.
(1) / Expenses (2) / Assets (3) / Stockholders' equity (4) / Liabilities (5):
A. Amounts charged to customers for goods sold or services.
B. Economic resources owned that are expected to benefit future time periods.
C. Residual interest of owners of a business.
D. Amounts owed by an enterprise.
E. Costs incurred to produce revenue.
Explanation / Answer
Answer 1. E. None of these Answer 2. A. Compensating Balance A compensating balance is a minimum balance that must be maintained in an account. The compensating balance is often used to offset a portion of the cost that a bank faces when extending a loan or credit to an individual or business, and is usually calculated as a percentage of the loan outstanding. The account where the funds are held are typically non-interest bearing, and the bank is free to use the money in other investment opportunities. Answer 3. E. Non of these Answer 4. 1. Expenses - E. Costs incurred to produce revenue. 2. Assets - B. Economic resources owned that are expected to benefit future time periods. 3. Stockholders' Equity - C. Residual interest of owners of a business. 4. Liabilities - D. Amounts owed by an enterprise.
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