Question

1. Answer the following True / False questions – then select the correct multiple choice response.

              ______    Total debits/credits must be equal in every journal entry.

______    A journal entry that increases an asset account must also increase a liability or stockholders’ equity account.

______    Expenses are increased with a debit, and decrease Retained Earnings

	A.	True, True, False
	B.	True, False, True
	C.	False, False, True
	D.	False, True, True
	E.	False, True, False

2. Aggie Consultants had the following balance sheet amounts at the beginning of 2017:

                                Total Assets                                          $400,000

                                Common Stock                                       50,000

                                Retained Earnings                                 100,000

During the year, total assets increased by $120,000 and total liabilities increased by $40,000. Owners invested an additional $20,000 in exchange for common stock and the company paid out $30,000 in dividends. No other transactions occurred except revenues, which totaled $220,000 for the year, and expenses.

Retained Earnings on December 31, 2017 is:

	A.	$170,000
	B.	$200,000
	C.	$140,000
	D.	$190,000
	E.	$160,000

Answer 1

Question 1

Correct answer---------(B) True, False, True.

.

Its not nessesary that A journal entry that increases an asset account must also increase a liability or stockholders’ equity account. A journal; entry which increase asset account may also increase another asset account.

All debits in a general journal entry are equal to credits, otherwise the trial balance will not match.

Question 2

Correct answer----------(E) $160,000

Working

	Assets	Common stock	Retained earnings	Liabilities
	$   400,000.00	$        50,000.00	$ 100,000.00	$ 250,000.00
Addition	$   120,000.00	$        20,000.00		$      40,000.00
Deduction			$   (30,000.00)
	$   520,000.00	$        70,000.00	$      70,000.00	$ 290,000.00
Net income			$      90,000.00
Ending Balance	$   5,20,000.00	$        70,000.00	$ 160,000.00	$ 290,000.00