question archive 1) Which of the following is an Asset source transaction? a
1) Which of the following is an Asset source transaction? a
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1) Which of the following is an Asset source transaction?
a. Issued common stock
b. Paid a cash dividend to stock holders
c. Collected cash from customers in settlement of accounts receivable
d. Accrued salary expense
2. Which of the following is an Asset use transaction?
a. Purchased machine for cash
b. Recorded insurance expense at the end of the period
c. Invested cash in an interest earning account
d. Accrued salary expense at the end of the period
3. Which of the following is a claims exchange transaction?
a. Recognized revenue earned on a contract where the cash had been collected at an earlier date
b. Issued common stock
c. Invested cash in an interest earning account
d. Purchased machine for cash
4. Which of the following is an Asset exchange transaction?
a. Issued common stock
b. Accrued salary expense at the end of the Accounting period
c. Collected cash on accounts receivable
d. Recognized revenue earned on a contract where the cash had been collected at an earlier date
5. If a company provides services to clients but has not yet collected any cash. how should that transaction be classified?
a. Claims exchange transaction
b. Asset use transaction
c. Asset source transaction
d. Asset exchange transaction
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Answer:
- a. Issued common stock
- a. Purchased machine for cash
- a. Recognized revenue earned on a contract where the cash had been collected at an earlier date.
- c. Collected cash on accounts receivable
- c. Asset source transaction
Step-by-step explanation
- The transaction which results in increased assets as well as a claims on asset.
- Asset purchased for cash , will increase the asset balance of the business and it will decrease the cash balance of business.
- The revenue recognition principle using accrual accounting requires that revenues are recognized when realized and earned-not when cash is received
- The cash collected on accounts receivable would be stated as an asset exchanging transaction as it would increase one asset i.e. cash and would decrease another asset that is accounts receivable
- This transaction increases assets (accounts receivable) and increases equity (revenue increases retained earnings), and is therefore classified as an asset source transaction
