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CHAPTER 3 THE ACCOUNTING EQUATION a) An asset account decreases.

1. What are the essential elements of an asset b) An asset account increases, and a
according to the Accounting Equation? corresponding claims account decreases.
a) Control, past events, future economic c) An asset account increases, and a
benefits corresponding claims account increases.
b) Present obligation, outflow of economic d) An asset account increases, and a
benefits corresponding claims account remains
c) Control, future economic benefits unchanged.
d) Past events, present obligation Answer: b) An asset account increases, and a
Answer: a) Control, past events, future economic corresponding claims account decreases.
benefits Explanation: Source of Assets (SA) involves an
Explanation: An asset is defined by its control, increase in assets and a corresponding decrease
past events, and its ability to provide future in claims (liabilities or owner's equity).
economic benefits. 9. In the Accounting Equation, what is the result of
2. How is equity calculated in the Accounting an exchange of assets (EA)?
Equation? a) An asset account decreases.
a) Assets - Liabilities b) An asset account increases, and another
b) Assets + Liabilities asset account decreases.
c) Liabilities - Assets c) A liability account increases.
d) Liabilities + Assets d) A liability account decreases.
Answer: a) Assets - Liabilities Answer: b) An asset account increases, and
Explanation: Equity is calculated as the another asset account decreases.
difference between assets and liabilities in the Explanation: Exchange of Assets (EA) involves an
Accounting Equation. increase in one asset account and a decrease in
3. What does the Expanded Accounting Equation another asset account.
include in addition to assets, liabilities, and 10. What happens in the Use of Assets (UA) category
equity? of the Accounting Equation?
a) Income and expenses a) An asset account decreases, and a
b) Revenues and costs corresponding claims account increases.
c) Investments and distributions b) An asset account increases.
d) Taxes and dividends c) A liability account decreases.
Answer: a) Income and expenses d) A liability account increases.
Explanation: The Expanded Accounting Equation Answer: a) An asset account decreases, and a
includes income and expenses in addition to corresponding claims account increases.
assets, liabilities, and equity. Explanation: Use of Assets (UA) involves a
4. What is income in the context of the Accounting decrease in assets and a corresponding increase
Equation? in claims (liabilities or equity).
a) Decrease in economic benefits 11. In the Accounting Equation, what does an
b) Increase in liabilities exchange of claims (EC) involve?
c) Increase in assets or decrease in a) An asset account decreases.
liabilities b) A claims account increases, and another
d) Decrease in equity claims account decreases.
Answer: c) Increase in assets or decrease in c) An expense account increases.
liabilities d) A revenue account increases.
Explanation: Income represents an increase in Answer: b) A claims account increases, and
economic benefits, either through an increase in another claims account decreases.
assets or a decrease in liabilities. Explanation: Exchange of Claims (EC) involves an
5. How are expenses defined in the Accounting increase in one claims account (e.g., receiving a
Equation? bill) and a decrease in another claims account
a) Increases in economic benefits (e.g., not paying it yet).
b) Decreases in assets 12. What is the formula for calculating equity in the
c) Decreases in liabilities Accounting Equation?
d) Decreases in equity a) Equity = Assets - Liabilities
Answer: d) Decreases in equity b) Equity = Assets + Liabilities
Explanation: Expenses result in decreases in c) Equity = Liabilities - Assets
equity, either through decreases in assets or d) Equity = Liabilities + Assets
increases in liabilities. Answer: a) Equity = Assets - Liabilities
6. What does the difference between income and Explanation: Equity is the difference between
expenses represent in the Accounting Equation? assets and liabilities in the Accounting Equation.
a) Total assets 13. Which component of the Accounting Equation
b) Equity represents economic benefits that are expected
c) Liabilities to be received in the future?
d) Profit or loss a) Assets
Answer: d) Profit or loss b) Liabilities
Explanation: The difference between income and c) Equity
expenses represents the profit or loss for the d) Expenses
period. Answer: a) Assets
7. How are profits or losses treated at the end of Explanation: Assets represent economic benefits
each accounting period in the Accounting that are expected to be received in the future.
Equation? 14. In the Accounting Equation, what do expenses
a) They are ignored. result in?
b) They are subtracted from equity. a) An increase in equity
c) They are added to liabilities. b) An increase in assets
d) They are carried forward to the next c) A decrease in liabilities
period. d) A decrease in equity
Answer: b) They are subtracted from equity. Answer: d) A decrease in equity
Explanation: Profits increase equity, and losses Explanation: Expenses result in a decrease in
decrease equity. They are closed to equity at the equity, which can be through a decrease in
end of each period. assets or an increase in liabilities.
8. What is the source of assets (SA) in the
Accounting Equation?
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15. How are profits or losses treated at the end of Answer: a) Assets
each accounting period in the Accounting Explanation: Assets represent economic benefits
Equation? that are expected to be received in the future.
a) They are ignored. 22. In the Accounting Equation, what do expenses
b) They are subtracted from equity. result in?
c) They are added to liabilities. a) An increase in equity
d) They are carried forward to the next b) An increase in assets
period. c) A decrease in liabilities
d) A decrease in equity
Answer: b) They are subtracted from equity.
Explanation: Profits increase equity, and losses Answer: d) A decrease in equity
decrease equity. They are closed to equity at the Explanation: Expenses result in a decrease in
end of each period. equity, which can be through a decrease in
16. What is the source of assets (SA) in the assets or an increase in liabilities.
Accounting Equation? 23. What happens when the Accounting Equation is
a) An asset account decreases. in balance?
b) An asset account increases, and a a) Assets are greater than liabilities.
corresponding claims account decreases. b) Assets equal liabilities plus equity.
c) An asset account increases, and a c) Liabilities are greater than assets.
corresponding claims account increases. d) Liabilities equal equity minus assets.
d) An asset account increases, and a Answer: b) Assets equal liabilities plus equity.
corresponding claims account remains Explanation: The Accounting Equation is in
unchanged. balance when assets equal liabilities plus equity.
Answer: b) An asset account increases, and a 24. Which of the following represents the
corresponding claims account decreases. fundamental Accounting Equation?
Explanation: Source of Assets (SA) involves an a) A = L - E
increase in assets and a corresponding decrease b) A + L = E
in claims (liabilities or owner's equity). c) A - L = E
17. In the Accounting Equation, what is the result of d) A = L + E
an exchange of assets (EA)? Answer: d) A = L + E
a) An asset account decreases. Explanation: The fundamental Accounting
b) An asset account increases, and another Equation is Assets (A) = Liabilities (L) + Equity
asset account decreases. (E).
c) A liability account increases. 25. If a company borrows money from a bank, how
d) A liability account decreases. does this transaction affect the Accounting
Answer: b) An asset account increases, and Equation?
another asset account decreases. a) Assets increase, and liabilities increase.
Explanation: Exchange of Assets (EA) involves an b) Assets increase, and equity decreases.
increase in one asset account and a decrease in c) Assets decrease, and liabilities increase.
another asset account. d) Assets decrease, and equity decreases.
18. What happens in the Use of Assets (UA) category Answer: a) Assets increase, and liabilities
of the Accounting Equation? increase.
a) An asset account decreases, and a Explanation: Borrowing money increases both
corresponding claims account increases. assets (cash) and liabilities (loan payable).
b) An asset account increases. 26. If a company purchases equipment with cash,
c) A liability account decreases. how does this transaction affect the Accounting
d) A liability account increases. Equation?
Answer: a) An asset account decreases, and a a) Assets increase, and liabilities decrease.
corresponding claims account increases. b) Assets decrease, and equity decreases.
Explanation: Use of Assets (UA) involves a c) Assets increase, and equity decreases.
decrease in assets and a corresponding increase d) Assets decrease, and liabilities decrease.
in claims (liabilities or equity). Answer: c) Assets increase, and equity
19. In the Accounting Equation, what does an decreases.
exchange of claims (EC) involve? Explanation: Purchasing equipment with cash
a) An asset account decreases. increases assets (equipment) but decreases
b) A claims account increases, and another equity (cash spent).
claims account decreases. 27. When a company pays its employees' salaries,
c) An expense account increases. how does this transaction affect the Accounting
d) A revenue account increases. Equation?
Answer: b) A claims account increases, and a) Assets increase, and liabilities increase.
another claims account decreases. b) Assets increase, and equity decreases.
Explanation: Exchange of Claims (EC) involves an c) Assets decrease, and liabilities decrease.
increase in one claims account (e.g., receiving a d) Assets decrease, and equity decreases.
bill) and a decrease in another claims account Answer: d) Assets decrease, and equity
(e.g., not paying it yet). decreases.
20. What is the formula for calculating equity in the Explanation: Paying salaries reduces assets
Accounting Equation? (cash) and decreases equity.
a) Equity = Assets - Liabilities 28. What does the exchange of claims (EC) category
b) Equity = Assets + Liabilities of the Accounting Equation involve?
c) Equity = Liabilities - Assets a) An increase in assets and an increase in
d) Equity = Liabilities + Assets liabilities.
Answer: a) Equity = Assets - Liabilities b) An increase in assets and a decrease in
Explanation: Equity is the difference between equity.
assets and liabilities in the Accounting Equation. c) An increase in liabilities and a decrease
21. Which component of the Accounting Equation in assets.
represents economic benefits that are expected d) An increase in liabilities and a decrease
to be received in the future? in equity.
a) Assets Answer: d) An increase in liabilities and a
b) Liabilities decrease in equity.
c) Equity Explanation: Exchange of Claims (EC) involves an
d) Expenses increase in liabilities and a decrease in equity.
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29. When a company receives a utility bill but has 35. In the Accounting Equation, when a company
not yet paid it, how does this affect the records an increase in liabilities, what happens to
Accounting Equation? equity?
a) Assets increase, and liabilities decrease. a) Equity increases.
b) Assets decrease, and equity increases. b) Equity decreases.
c) Assets increase, and equity decreases. c) Equity remains unchanged.
d) Assets decrease, and liabilities increase. d) It depends on the specific liability.
Answer: d) Assets decrease, and liabilities Answer: b) Equity decreases.
increase. Explanation: An increase in liabilities represents
Explanation: Receiving a utility bill increases an obligation, which reduces equity.
liabilities (accounts payable) until it's paid. 36. In the Accounting Equation, what happens when
30. What happens to equity in the Accounting a company records an increase in an asset
Equation when a company records an increase in without a corresponding increase in liabilities?
revenue? a) Equity increases.
a) Equity decreases. b) Equity decreases.
b) Equity increases. c) Equity remains unchanged.
c) Equity remains unchanged. d) It depends on the specific asset.
d) It depends on the amount of the Answer: a) Equity increases.
revenue.
Answer: b) Equity increases. Explanation: An increase in assets without a
Explanation: Recording an increase in revenue corresponding increase in liabilities increases
increases equity since revenue contributes to the equity.
company's profitability. 37. When a company records a loss in the
Accounting Equation, how does this affect
In the Accounting Equation, if assets increase equity?
while liabilities remain unchanged, what happens a) Equity increases.
to equity? b) Equity decreases.
e) Equity decreases. c) Equity remains unchanged.
f) Equity increases. d) It depends on the specific loss.
g) Equity remains unchanged. Answer: b) Equity decreases.
h) It depends on the specific assets Explanation: Recording a loss decreases equity
involved. as it reflects a reduction in value or profit.
Answer: b) Equity increases. 38. How is equity impacted when a company records
Explanation: When assets increase and liabilities a gain in the Accounting Equation?
remain the same, equity increases because the a) Equity increases.
company has more resources. b) Equity decreases.
c) Equity remains unchanged.
31. In the Accounting Equation, if a company pays d) It depends on the specific gain.
off a portion of its loan (liability), how does this Answer: a) Equity increases.
affect equity? Explanation: Recording a gain increases equity
a) Equity decreases. as it represents an increase in value or profit.
b) Equity increases. 39. In the Accounting Equation, when a company
c) Equity remains unchanged. repays a portion of its loan, what happens to
d) It depends on the amount of the loan liabilities?
payment. a) Liabilities increase.
Answer: b) Equity increases. b) Liabilities decrease.
Explanation: Paying off a portion of a loan c) Liabilities remain unchanged.
reduces liabilities, increasing equity. d) It depends on the specific loan.
Answer: b) Liabilities decrease.
32. What happens to the Accounting Equation when Explanation: Repaying a portion of a loan
a company distributes dividends to its reduces liabilities.
shareholders? 40. In the Accounting Equation, when a company
a) Assets increase. records an increase in revenue without any
b) Liabilities increase. associated expenses, what happens to equity?
c) Equity increases. a) Equity increases.
d) Equity decreases. b) Equity decreases.
Answer: d) Equity decreases. c) Equity remains unchanged.
Explanation: Distributing dividends reduces d) It depends on the specific revenue.
equity as it represents a return of profits to Answer: a) Equity increases.
shareholders. Explanation: Recording an increase in revenue
33. How does the Accounting Equation change when without expenses increases equity since it
a company records an increase in an expense? reflects additional income.
a) Assets decrease. 41. How does equity change in the Accounting
b) Liabilities decrease. Equation when a company distributes profits to
c) Equity increases. its shareholders?
d) Equity decreases. a) Equity increases.
Answer: d) Equity decreases. b) Equity decreases.
Explanation: Recording an increase in an c) Equity remains unchanged.
expense reduces equity as it reflects a cost d) It depends on the specific profits.
incurred by the company. Answer: b) Equity decreases.
34. What does it mean when the Accounting Explanation: Distributing profits (dividends)
Equation is "in balance"? reduces equity as it represents a return of
a) Assets equal equity. earnings to shareholders.
b) Liabilities equal equity. 42. In the Accounting Equation, if a company records
c) Assets equal liabilities plus equity. an increase in assets and a corresponding
d) Equity equals liabilities minus assets. increase in liabilities, what happens to equity?
Answer: c) Assets equal liabilities plus equity. a) Equity increases.
Explanation: The Accounting Equation is in b) Equity decreases.
balance when assets equal the sum of liabilities c) Equity remains unchanged.
and equity. d) It depends on the specific assets and
liabilities.
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Answer: c) Equity remains unchanged. Explanation: Recording a decrease in assets

Explanation: When both assets and liabilities without liabilities reduces equity as it reflects a
increase equally, equity remains the same. loss or reduction in value.
43. When a company records an increase in assets 50. Question: Company A has total assets of
and a corresponding increase in liabilities, what $50,000, total liabilities of $30,000, and owner's
is the net effect on the Accounting Equation? equity of $20,000. What is the company's net
a) The equation is out of balance. income?
b) The equation is in balance. a) $50,000
c) Equity decreases. b) $30,000
d) Assets increase. c) $20,000
Answer: b) The equation is in balance. d) $10,000
Explanation: When assets increase and liabilities Answer: d) $10,000
increase by the same amount, the Accounting Explanation: Net income is calculated as Total
Equation remains in balance. Revenue - Total Expenses. In this case, the
increase in equity is due to net income, which is
44. In the Accounting Equation, if a company records $10,000 ($20,000 - $10,000).
a decrease in assets without any associated 51. Question: If a company's total revenue is
liabilities, what happens to equity? $80,000, and its total expenses are $50,000,
a) Equity increases. what is its net income?
b) Equity decreases. a) $80,000
c) Equity remains unchanged. b) $50,000
d) It depends on the specific decrease in c) $30,000
assets. d) $130,000
Answer: b) Equity decreases. Answer: c) $30,000
Explanation: Recording a decrease in assets Explanation: Net income is calculated as Total
without liabilities reduces equity, as it represents Revenue - Total Expenses, which is $80,000 -
a loss or reduction in value. $50,000 = $30,000.
45. How is equity affected when a company records 52. Question: Company B purchased a piece of
an increase in expenses without any associated equipment for $15,000. If the equipment's
revenue in the Accounting Equation? salvage value is $3,000 and its useful life is 5
a) Equity increases. years, what is the annual depreciation expense
b) Equity decreases. using the straight-line method?
c) Equity remains unchanged. a) $3,000
d) It depends on the specific expenses. b) $2,400
Answer: b) Equity decreases. c) $4,000
Explanation: Recording an increase in expenses d) $1,200
without revenue decreases equity as it Answer: b) $2,400
represents a cost. Explanation: Straight-line depreciation is
46. In the Accounting Equation, when a company calculated as (Cost - Salvage Value) / Useful Life.
records an increase in liabilities without So, ($15,000 - $3,000) / 5 = $2,400.
corresponding assets, what happens to equity? 53. Question: If a company's beginning inventory is
a) Equity increases. $10,000, it makes purchases of $5,000 during
b) Equity decreases. the year, and its ending inventory is $8,000,
c) Equity remains unchanged. what is the cost of goods sold (COGS)?
d) It depends on the specific liabilities. a) $7,000
Answer: a) Equity increases. b) $8,000
Explanation: Recording an increase in liabilities c) $10,000
without assets increases equity as it reflects d) $5,000
borrowing or additional obligations. Answer: a) $7,000
Explanation: COGS is calculated as Beginning
47. When a company records a gain in the Inventory + Purchases - Ending Inventory, which
Accounting Equation without any associated is $10,000 + $5,000 - $8,000 = $7,000.
losses, what happens to equity? 54. Question: If a company has $50,000 in assets
a) Equity increases. and $20,000 in liabilities, what is its owner's
b) Equity decreases. equity?
c) Equity remains unchanged. a) $30,000
d) It depends on the specific gain. b) $50,000
Answer: a) Equity increases. c) $20,000
Explanation: Recording a gain without losses d) $70,000
increases equity as it represents a positive Answer: a) $30,000
financial outcome. Explanation: Owner's equity is calculated as
Assets - Liabilities, which is $50,000 - $20,000 =
48. In the Accounting Equation, if a company repays $30,000.
its entire loan, what happens to liabilities? 55. Question: A company's total revenue is $60,000,
a) Liabilities increase. and its total expenses are $40,000. What is its
b) Liabilities decrease. profit margin as a percentage?
c) Liabilities remain unchanged. a) 40%
d) It depends on the specific loan. b) 60%
Answer: b) Liabilities decrease. c) 100%
Explanation: Repaying the entire loan reduces d) 150%
liabilities to zero. Answer: a) 40%
49. In the Accounting Equation, when a company Explanation: Profit margin is calculated as (Net
records a decrease in assets without any Income / Total Revenue) x 100%, which is
associated liabilities, what happens to equity? ($60,000 - $40,000) / $60,000 x 100% = 40%.
a) Equity increases. 56. Question: If a company's current assets are
b) Equity decreases. $30,000 and its current liabilities are $20,000,
c) Equity remains unchanged. what is its current ratio?
d) It depends on the specific decrease in a) 0.67
assets. b) 1.5
Answer: b) Equity decreases. c) 1.2
d) 1.67
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Answer: d) 1.67 Explanation: Assets are calculated as Liabilities +

Explanation: Current ratio is calculated as Owner's Equity, which is $40,000 + $60,000 =
Current Assets / Current Liabilities, which is $100,000.
$30,000 / $20,000 = 1.5. 64. Question: If a company's owner's equity is
57. Question: A company has a cash balance of $75,000, and its liabilities are $45,000, what are
$10,000, accounts receivable of $5,000, and its assets?
inventory of $15,000. What is its total current a) $30,000
assets? b) $120,000
a) $20,000 c) $45,000
b) $30,000 d) $75,000
c) $5,000 Answer: b) $120,000
d) $15,000 Explanation: Assets are calculated as Liabilities +
Answer: b) $30,000 Owner's Equity, which is $45,000 + $75,000 =
Explanation: Total current assets are the sum of $120,000.
cash, accounts receivable, and inventory, which
is $10,000 + $5,000 + $15,000 = $30,000. 65. Question: A company's assets are $180,000, and
58. Question: If a company's total liabilities are its liabilities are $120,000. What is its owner's
$60,000 and its owner's equity is $40,000, what equity?
is its total assets? a) $60,000
a) $20,000 b) $180,000
b) $60,000 c) $120,000
c) $100,000 d) $300,000
d) $40,000 Answer: a) $60,000
Explanation: Owner's equity is calculated as
Answer: c) $100,000 Assets - Liabilities, which is $180,000 - $120,000
Explanation: Total assets are calculated as Total = $60,000.
Liabilities + Owner's Equity, which is $60,000 + 66. Question: If a company's liabilities are $25,000,
$40,000 = $100,000. and its owner's equity is $55,000, what are its
59. Question: A company's assets are $80,000, and assets?
its liabilities are $30,000. What is its owner's a) $30,000
equity? b) $80,000
a) $50,000 c) $55,000
b) $80,000 d) $25,000
c) $30,000 Answer: b) $80,000
d) $110,000 Explanation: Assets are calculated as Liabilities +
Answer: a) $50,000 Owner's Equity, which is $25,000 + $55,000 =
Explanation: Owner's equity is calculated as $80,000.
Assets - Liabilities, which is $80,000 - $30,000 = 67. Question: A company's assets are $200,000, and
$50,000. its owner's equity is $80,000. What are its
60. Question: If a company's owner's equity is liabilities?
$25,000, and its assets are $60,000, what are its a) $280,000
liabilities? b) $80,000
a) $35,000 c) $120,000
b) $60,000 d) $200,000
c) $25,000 Answer: c) $120,000
d) $85,000 Explanation: Liabilities are calculated as Assets -
Answer: a) $35,000 Owner's Equity, which is $200,000 - $80,000 =
Explanation: Liabilities are calculated as Assets - $120,000.
Owner's Equity, which is $60,000 - $25,000 = 68. Question: If a company's owner's equity is
$35,000. $40,000, and its liabilities are $60,000, what are
61. Question: A company's assets are $120,000, and its assets?
its owner's equity is $70,000. What are its a) $100,000
liabilities? b) $60,000
a) $120,000 c) $40,000
b) $70,000 d) $20,000
c) $50,000 Answer: a) $100,000
d) $190,000 Explanation: Assets are calculated as Liabilities +
Answer: c) $50,000 Owner's Equity, which is $60,000 + $40,000 =
Explanation: Liabilities are calculated as Assets - $100,000.
Owner's Equity, which is $120,000 - $70,000 = 69. Question: A company's assets are $250,000, and
$50,000. its liabilities are $150,000. What is its owner's
62. Question: If a company's assets are $150,000, equity?
and its liabilities are $90,000, what is its owner's a) $400,000
equity? b) $250,000
a) $60,000 c) $150,000
b) $150,000 d) $100,000
c) $90,000 Answer: d) $100,000
d) $240,000 Explanation: Owner's equity is calculated as
Answer: a) $60,000 Assets - Liabilities, which is $250,000 - $150,000
Explanation: Owner's equity is calculated as = $100,000.
Assets - Liabilities, which is $150,000 - $90,000 70. Question: If a company's liabilities are $30,000,
= $60,000. and its owner's equity is $90,000, what are its
63. Question: A company's liabilities are $40,000, assets?
and its owner's equity is $60,000. What are its a) $120,000
assets? b) $90,000
a) $100,000 c) $60,000
b) $40,000 d) $30,000
c) $60,000 Answer: a) $120,000
d) $20,000 Explanation: Assets are calculated as Liabilities +
Answer: a) $100,000 Owner's Equity, which is $30,000 + $90,000 =
$120,000.
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71. Question: A company's assets are $300,000, and b) $35,000

its liabilities are $200,000. What is its owner's c) $65,000
equity? d) $30,000
a) $100,000 Answer: a) $100,000
b) $300,000 Explanation: Assets are calculated as Liabilities +
c) $200,000 Owner's Equity, which is $35,000 + $65,000 =
d) $500,000 $100,000.
Answer: a) $100,000 79. Question: A company's assets are $320,000, and
Explanation: Owner's equity is calculated as its owner's equity is $240,000. What are its
Assets - Liabilities, which is $300,000 - $200,000 liabilities?
= $100,000. a) $560,000
72. Question: If a company's owner's equity is b) $320,000
$60,000, and its liabilities are $40,000, what are c) $240,000
its assets? d) $80,000
a) $20,000 Answer: d) $80,000
b) $100,000 Explanation: Liabilities are calculated as Assets -
c) $60,000 Owner's Equity, which is $320,000 - $240,000 =
d) $40,000 $80,000.
Answer: b) $100,000 80. Question: If a company's owner's equity is
Explanation: Assets are calculated as Liabilities + $80,000, and its liabilities are $40,000, what are
Owner's Equity, which is $40,000 + $60,000 = its assets?
$100,000. a) $20,000
73. Question: A company's assets are $180,000, and b) $120,000
its owner's equity is $120,000. What are its c) $80,000
liabilities? d) $40,000
a) $300,000 Answer: b) $120,000
b) $120,000 Explanation: Assets are calculated as Liabilities +
c) $60,000 Owner's Equity, which is $40,000 + $80,000 =
d) $180,000 $120,000.
Answer: c) $60,000 81. Question: A company's assets are $260,000, and
Explanation: Liabilities are calculated as Assets - its owner's equity is $180,000. What are its
Owner's Equity, which is $180,000 - $120,000 = liabilities?
$60,000. a) $440,000
74. Question: If a company's liabilities are $25,000, b) $260,000
and its owner's equity is $75,000, what are its c) $180,000
assets? d) $80,000
a) $50,000 Answer: d) $80,000
b) $25,000 Explanation: Liabilities are calculated as Assets -
c) $100,000 Owner's Equity, which is $260,000 - $180,000 =
d) $75,000 $80,000.
Answer: c) $100,000 82. Question: If a company's liabilities are $45,000,
Explanation: Assets are calculated as Liabilities + and its owner's equity is $55,000, what are its
Owner's Equity, which is $25,000 + $75,000 = assets?
$100,000. a) $10,000
75. Question: A company's assets are $240,000, and b) $100,000
its owner's equity is $160,000. What are its c) $55,000
liabilities? d) $45,000
a) $80,000 Answer: b) $100,000
b) $240,000 Explanation: Assets are calculated as Liabilities +
c) $160,000 Owner's Equity, which is $45,000 + $55,000 =
d) $400,000 $100,000.
Answer: a) $80,000 83. Question: A company's assets are $300,000, and
Explanation: Liabilities are calculated as Assets - its owner's equity is $220,000. What are its
Owner's Equity, which is $240,000 - $160,000 = liabilities?
$80,000. a) $520,000
76. Question: If a company's owner's equity is b) $300,000
$50,000, and its liabilities are $30,000, what are c) $220,000
its assets? d) $80,000
a) $20,000 Answer: d) $80,000
b) $80,000 Explanation: Liabilities are calculated as Assets -
c) $50,000 Owner's Equity, which is $300,000 - $220,000 =
d) $30,000 $80,000.
Answer: b) $80,000 84. Question: A company's assets are $150,000, and
Explanation: Assets are calculated as Liabilities + its liabilities are $90,000. What is its owner's
Owner's Equity, which is $30,000 + $50,000 = equity?
$80,000. a) $60,000
77. Question: A company's assets are $280,000, and b) $150,000
its owner's equity is $200,000. What are its c) $90,000
liabilities? d) $240,000
a) $480,000 Answer: a) $60,000
b) $280,000 Explanation: Owner's equity is calculated as
c) $200,000 Assets - Liabilities, which is $150,000 - $90,000
d) $80,000 = $60,000.
Answer: d) $80,000
Explanation: Liabilities are calculated as Assets - 85. Question: If a company's owner's equity is
Owner's Equity, which is $280,000 - $200,000 = $45,000, and its liabilities are $25,000, what are
$80,000. its assets?
78. Question: If a company's liabilities are $35,000, a) $20,000
and its owner's equity is $65,000, what are its b) $70,000
assets? c) $45,000
a) $100,000 d) $25,000
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Answer: b) $70,000 Explanation: Liabilities are calculated as Assets -

Explanation: Assets are calculated as Liabilities + Owner's Equity, which is $260,000 - $180,000 =
Owner's Equity, which is $25,000 + $45,000 = $80,000.
$70,000. 93. Question: If a company's owner's equity is
86. Question: A company's assets are $180,000, and $50,000, and its liabilities are $30,000, what are
its owner's equity is $120,000. What are its its assets?
liabilities? a) $20,000
a) $300,000 b) $120,000
b) $180,000 c) $50,000
c) $120,000 d) $30,000
d) $60,000 Answer: b) $120,000
Answer: d) $60,000 Explanation: Assets are calculated as Liabilities +
Explanation: Liabilities are calculated as Assets - Owner's Equity, which is $30,000 + $50,000 =
Owner's Equity, which is $180,000 - $120,000 = $120,000.
$60,000. 94. Question: A company's assets are $300,000, and
its owner's equity is $220,000. What are its
87. Question: If a company's liabilities are $35,000, liabilities?
and its owner's equity is $65,000, what are its a) $520,000
assets? b) $300,000
a) $100,000 c) $220,000
b) $35,000 d) $80,000
c) $65,000 Answer: d) $80,000
d) $30,000 Explanation: Liabilities are calculated as Assets -
Answer: a) $100,000 Owner's Equity, which is $300,000 - $220,000 =
Explanation: Assets are calculated as Liabilities + $80,000.
Owner's Equity, which is $35,000 + $65,000 = 95. Question: If a company's liabilities are $35,000,
$100,000. and its owner's equity is $65,000, what are its
88. Question: A company's assets are $280,000, and assets?
its owner's equity is $200,000. What are its a) $100,000
liabilities? b) $35,000
a) $480,000 c) $65,000
b) $280,000 d) $30,000
c) $200,000 Answer: a) $100,000
d) $80,000 Explanation: Assets are calculated as Liabilities +
Answer: d) $80,000 Owner's Equity, which is $35,000 + $65,000 =
Explanation: Liabilities are calculated as Assets - $100,000.
Owner's Equity, which is $280,000 - $200,000 = 96. Question: A company's assets are $260,000, and
$80,000. its owner's equity is $180,000. What are its
89. Question: If a company's owner's equity is liabilities?
$80,000, and its liabilities are $40,000, what are a) $440,000
its assets? b) $260,000
a) $20,000 c) $180,000
b) $120,000 d) $80,000
c) $80,000 Answer: d) $80,000
d) $40,000 Explanation: Liabilities are calculated as Assets -
Answer: b) $120,000 Owner's Equity, which is $260,000 - $180,000 =
Explanation: Assets are calculated as Liabilities + $80,000.
Owner's Equity, which is $40,000 + $80,000 = 97. Question: If a company's owner's equity is
$120,000. $50,000, and its liabilities are $30,000, what are
its assets?
90. Question: A company's assets are $320,000, and a) $20,000
its owner's equity is $240,000. What are its b) $120,000
liabilities? c) $50,000
a) $560,000 d) $30,000
b) $320,000 Answer: b) $120,000
c) $240,000
d) $80,000 Explanation: Assets are calculated as Liabilities +
Answer: d) $80,000 Owner's Equity, which is $30,000 + $50,000 =
Explanation: Liabilities are calculated as Assets - $120,000.
Owner's Equity, which is $320,000 - $240,000 = 98. Question: A company's assets are $300,000, and
$80,000. its owner's equity is $220,000. What are its
91. Question: If a company's liabilities are $45,000, liabilities?
and its owner's equity is $55,000, what are its a) $520,000
assets? b) $300,000
a) $10,000 c) $220,000
b) $100,000 d) $80,000
c) $55,000 Answer: d) $80,000
d) $45,000 Explanation: Liabilities are calculated as Assets -
Answer: b) $100,000 Owner's Equity, which is $300,000 - $220,000 =
Explanation: Assets are calculated as Liabilities + $80,000.
Owner's Equity, which is $45,000 + $55,000 =
$100,000.
92. Question: A company's assets are $260,000, and
its owner's equity is $180,000. What are its
liabilities?
a) $440,000
b) $260,000
c) $180,000
d) $80,000
Answer: d) $80,000