2/2/25, 4:26 PM LO 2-1: Use a horizontal financial statements model to show how accounting...(Pre-req. LO1-10): SP2025 MBA 601-QL/QX Accounti…
Question 1 11..11 pts
Which of the following shows how acquiring cash from the issue of common
stock will affect a company’s financial statements?
Balance sheet Income Statement
Statement of
Net Cash Flows
Assets = Liabilities + Equity Rev. − Exp. =
Inc.
A. + = NA + + NA – NA = NA NA
B. + = NA + + NA – NA = NA + IA
C. + = NA + + NA – NA = NA + FA
D. + = NA + + + – NA = + + FA
Option A
Option B
Option C
Option D
Collecting cash from the issue of common stock is an asset source
transaction. It causes assets (cash) and equity (common stock) to
increase. Since the company did not engage in operations to generate
earnings or pay expenses, there is no effect on the income
statement. Since the cash inflow is from investors, it is a financing
activity.
Question 2 11..11 pts
Which of the following shows how borrowing cash from creditors will affect a
company’s financial statements?
Statement of
Balance sheet Income Statement Cash Flows
,2/2/25, 4:26 PM LO 2-1: Use a horizontal financial statements model to show how accounting...(Pre-req. LO1-10): SP2025 MBA 601-QL/QX Accounti…
Net
Assets = Liabilities + Equity Rev. − Exp. =
Inc.
A. + = + + NA NA – NA = NA + FA
B. + = + + NA NA – + = – + FA
C. + = + + NA NA – NA = NA + IA
D. + = NA + + + – NA = + + FA
Option A
Option B
Option C
Option D
Borrowing cash from creditors is an asset source transaction. It causes
assets (cash) and liabilities (notes payable) to increase. Since the
company did not engage in operations to generate earnings or pay
expenses, there is no effect on the income statement. Since the cash
inflow is from creditors, it is a financing activity.
Question 3 11..11 pts
Which of the following shows how recognizing cash revenue will affect a
company’s financial statements?
Balance sheet Income Statement
Statement of
Net Cash Flows
Assets = Liabilities + Equity Rev. − Exp. =
Inc.
A. + = NA + + NA – NA = NA NA
B. + = NA + + + – NA =+ NA
C. + = NA + + + – NA = + + OA
D. + = NA + + + – NA = + + IA
,2/2/25, 4:26 PM LO 2-1: Use a horizontal financial statements model to show how accounting...(Pre-req. LO1-10): SP2025 MBA 601-QL/QX Accounti…
Option A
Option B
Option C
Option D
Cash generated through earnings is an asset source transaction. It
causes assets (cash) and equity (retained earnings) to increase. Since
the company engaged in operations to generate revenue, there is an
effect on the income statement. Specifically, revenue and net income
increase. Since the cash inflow is from customers, it is an operating
activity.
Question 4 11..11 pts
Which of the following shows how incurring cash expenses will affect a
company’s financial statements?
Balance sheet Income Statement
Statement of
Net Cash Flows
Assets = Liabilities + Equity Rev. − Exp. =
Inc.
A. – = NA + + NA – + = – – OA
B. – = NA + – NA – + = – – OA
C. – = NA + – NA – + = + – OA
D. – = NA + – NA – + = – – FA
Option A
Option B
Option C
Option D
, 2/2/25, 4:26 PM LO 2-1: Use a horizontal financial statements model to show how accounting...(Pre-req. LO1-10): SP2025 MBA 601-QL/QX Accounti…
A cash payment for expenses is an asset use transaction. It causes
assets (cash) and equity (retained earnings) to decrease. Since the
company incurred expenses to generate revenue, there is an effect on
the income statement. Specifically, expenses increase and net income
decreases. Since the cash outflow is for expenses, it is an operating
activity.
Question 5 11..11 pts
Which of the following shows how paying a cash dividend will affect a
company’s financial statements?
Balance sheet Income Statement
Statement of
Net Cash Flows
Assets = Liabilities + Equity Rev. − Exp. =
Inc.
A. – = NA + + NA – + = – – OA
B. – = NA + – NA – + = – – OA
C. + = NA + + NA – NA = NA – FA
D. – = NA + – NA – NA = NA – FA
Option A
Option B
Option C
Option D
A cash payment for dividends is an asset use transaction. It causes
assets (cash) and equity (retained earnings) to decrease. Since the
company is transferring wealth (cash) to its owners, there is no effect on
the income statement. Since the cash is transferred to the investors, it is
a financing activity.
Question 1 11..11 pts
Which of the following shows how acquiring cash from the issue of common
stock will affect a company’s financial statements?
Balance sheet Income Statement
Statement of
Net Cash Flows
Assets = Liabilities + Equity Rev. − Exp. =
Inc.
A. + = NA + + NA – NA = NA NA
B. + = NA + + NA – NA = NA + IA
C. + = NA + + NA – NA = NA + FA
D. + = NA + + + – NA = + + FA
Option A
Option B
Option C
Option D
Collecting cash from the issue of common stock is an asset source
transaction. It causes assets (cash) and equity (common stock) to
increase. Since the company did not engage in operations to generate
earnings or pay expenses, there is no effect on the income
statement. Since the cash inflow is from investors, it is a financing
activity.
Question 2 11..11 pts
Which of the following shows how borrowing cash from creditors will affect a
company’s financial statements?
Statement of
Balance sheet Income Statement Cash Flows
,2/2/25, 4:26 PM LO 2-1: Use a horizontal financial statements model to show how accounting...(Pre-req. LO1-10): SP2025 MBA 601-QL/QX Accounti…
Net
Assets = Liabilities + Equity Rev. − Exp. =
Inc.
A. + = + + NA NA – NA = NA + FA
B. + = + + NA NA – + = – + FA
C. + = + + NA NA – NA = NA + IA
D. + = NA + + + – NA = + + FA
Option A
Option B
Option C
Option D
Borrowing cash from creditors is an asset source transaction. It causes
assets (cash) and liabilities (notes payable) to increase. Since the
company did not engage in operations to generate earnings or pay
expenses, there is no effect on the income statement. Since the cash
inflow is from creditors, it is a financing activity.
Question 3 11..11 pts
Which of the following shows how recognizing cash revenue will affect a
company’s financial statements?
Balance sheet Income Statement
Statement of
Net Cash Flows
Assets = Liabilities + Equity Rev. − Exp. =
Inc.
A. + = NA + + NA – NA = NA NA
B. + = NA + + + – NA =+ NA
C. + = NA + + + – NA = + + OA
D. + = NA + + + – NA = + + IA
,2/2/25, 4:26 PM LO 2-1: Use a horizontal financial statements model to show how accounting...(Pre-req. LO1-10): SP2025 MBA 601-QL/QX Accounti…
Option A
Option B
Option C
Option D
Cash generated through earnings is an asset source transaction. It
causes assets (cash) and equity (retained earnings) to increase. Since
the company engaged in operations to generate revenue, there is an
effect on the income statement. Specifically, revenue and net income
increase. Since the cash inflow is from customers, it is an operating
activity.
Question 4 11..11 pts
Which of the following shows how incurring cash expenses will affect a
company’s financial statements?
Balance sheet Income Statement
Statement of
Net Cash Flows
Assets = Liabilities + Equity Rev. − Exp. =
Inc.
A. – = NA + + NA – + = – – OA
B. – = NA + – NA – + = – – OA
C. – = NA + – NA – + = + – OA
D. – = NA + – NA – + = – – FA
Option A
Option B
Option C
Option D
, 2/2/25, 4:26 PM LO 2-1: Use a horizontal financial statements model to show how accounting...(Pre-req. LO1-10): SP2025 MBA 601-QL/QX Accounti…
A cash payment for expenses is an asset use transaction. It causes
assets (cash) and equity (retained earnings) to decrease. Since the
company incurred expenses to generate revenue, there is an effect on
the income statement. Specifically, expenses increase and net income
decreases. Since the cash outflow is for expenses, it is an operating
activity.
Question 5 11..11 pts
Which of the following shows how paying a cash dividend will affect a
company’s financial statements?
Balance sheet Income Statement
Statement of
Net Cash Flows
Assets = Liabilities + Equity Rev. − Exp. =
Inc.
A. – = NA + + NA – + = – – OA
B. – = NA + – NA – + = – – OA
C. + = NA + + NA – NA = NA – FA
D. – = NA + – NA – NA = NA – FA
Option A
Option B
Option C
Option D
A cash payment for dividends is an asset use transaction. It causes
assets (cash) and equity (retained earnings) to decrease. Since the
company is transferring wealth (cash) to its owners, there is no effect on
the income statement. Since the cash is transferred to the investors, it is
a financing activity.
