chap-3_sulution - Chapter 3: Operating decisions and The...

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Chapter – 3: Operating decisions and The Income Statement ANSWERS TO MULTIPLE CHOICE 1. b) 2. c) 3. d) 4. a) 5. b) 6. d) 7. c) 8. a) 9. c) 10. c) M3–3. Cash Basis Income Statement Accrual Basis Income Statement Revenues: Cash sales Customer deposits $6,000 1,000 Revenues: Sales to customers $10,000 Expenses: Inventory purchases Wages paid 1,000 600 Expenses: Cost of sales Wages expense Utilities expense 7,000 600 200 Net Income $5,400 Net Income $2,200 E3–5. Balance Sheet Income Statement Assets Liabilities Stockholders’ Equity Revenues Expenses Net Income a. +48,869 NE +48,869 NE NE NE b. +299,794 +299,794 NE NE NE NE c. +58,181 +58,181 NE NE NE NE d. +413,957/ –290,469 NE +123,488 +413,957 +290,469 +123,488 1
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e. –2,347 NE –2,347 NE NE NE f. +/–18,645 NE NE NE NE NE g. –57,329 +28,664 –85,993 NE +85,993 –85,993 h. +1,039 NE +1,039 +1,039 NE +1,039 i. NE +4,717 –4,717 NE +4,717 –4,717 Transaction (f) results in an increase in an asset (property, plant, and equipment) and a decrease in an asset (cash). Therefore, there is no net effect on assets.
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This note was uploaded on 12/24/2008 for the course CIM ACCT501 taught by Professor Talah during the Spring '08 term at King Fahd University of Petroleum & Minerals.

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chap-3_sulution - Chapter 3: Operating decisions and The...

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