1

Palmer Hand Clinic has the following accounts andbalances:

Cash, $2,350
Accounts Receivable, $280
Professional Equipment, $1,200
Office Equipment, $6,700
Accounts Payable, $4,380
P. Palmer, Capital, $2,000
Income from Services, $6,000
Rent Expense, $1,850

What is the amount of owner's equity?

a.$6,150

b.$4,150

c.$8,000

d.$2,000

2

Which of the following is an example of an asset?

a.Accounts Payable

b.Outstanding Rent

c.Prepaid Insurance

d.Capital

3

When an owner withdraws cash from the business, it results in adecrease in:

a.Cash and Long-term Liabilities.

b.Cash and Contingent Liabilities.

c.Cash and Accounts Payable.

d.Cash and Accounts Receivable.

e.Cash and Capital.

4

If an owner invests his or her computer, printer, and cash inthe business, there is an increase in:

a.Computer Equipment, Cash, and Capital.

b.Cash and Accounts Payable.

c.Cash and Drawing.

d.Computer Equipment, Accounts Payable, and Drawing.

e.Computer Equipment and Expenses.

5

Magna Company paid $2,400 for a 6-month liability insurancepolicy. At the time of payment, this transaction should be recordedas

a.Insurance Expense, $400.

b.Insurance Expense, $2,400.

c.Prepaid Insurance, $2,400.

d.Prepaid Insurance, $400.

6

The purchase of an asset (like Equipment) on account will

a.increase total liabilities and decrease total assets.

b.increase total assets and increase total liabilities.

c.increase total assets and increase owner's equity.

d.have no effect on total assets or total liabilities.

e.increase total assets and decrease owner's equity.

7

Petkus Company paid Perkins Products, a creditor, on account,$7,500. What are the effects on the fundamental accountequation?

a.Assets increase $7,500; liabilities decrease $7,500; owner'sequity, no effect.

b.Assets decrease $7,500; liabilities, no effect; owner's equitydecreases $7,500.

c.Assets increase $7,500; liabilities, no effect; owner's equityincreases $7,500.

d.Assets decrease $7,500; liabilities decrease $7,500; owner'sequity, no effect.

8

Jamie's Lighting Company paid rent for the month, $2,500. Whatare the effects on the fundamental accounting equation?

a.Assets increase $2,500; liabilities, no effect; owner's equityincreases $2,500.

b.Assets decrease $2,500; liabilities, decrease $2,500; owner'sequity, no effect.

c.Assets decrease $2,500; liabilities, no effect; owner's equityincreases $2,500.

d.Assets decrease $2,500; liabilities, no effect; owner's equitydecreases $2,500.