BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Total assets increased by $12, 000
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Total liabilities decreased by $7, 000
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Makes the business more liquid from the creditor’s point of view
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Has no impact on owners equity
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Detailed explanation-1: -Answer and Explanation: The answer is 3. 60, 000.
Detailed explanation-2: -The safety principle: assets are valued at no more than the value for which they are insured. This is the correct option. The safety principle does not exist and insurance values are irrelevant in accounting.
Detailed explanation-3: -Explanation: If an inventory is purchased for cash, it means there will be an increase in inventory which is a current asset. At the same time, a cash payment will reduce the cash balance which is a current asset.
Detailed explanation-4: -On a balance sheet or in a ledger, assets equal liabilities plus shareholders’ equity. An increase in the value of assets is a debit to the account, and a decrease is a credit.