Howard Company Had a Transaction That Caused a $5,000 Increase

question 117

Multiple Choice

Howard Company had a transaction that caused a $5,000 increase in both assets and total liabilities. This transaction could have been a(n)

• A) purchase of office equipment for $12,000, paying $7,000 cash and issuing a note payable for the balance.
• B) investment of $5,000 cash in the business by the stockholders.
• C) purchase of office equipment for $5,000 cash.
• D) repayment of a $5,000 bank loan.

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Definitions:

Long-Term Investments

Assets that a company intends to hold for more than a year, such as stocks, bonds, or real estate.

Fixed Assets

Long-term tangible assets used in the operation of a business and not expected to be converted into cash within one year, such as buildings, machinery, and equipment.

Long-Term Liabilities

Liabilities that will not be due for a long time (usually more than one year).

Price-Earnings Ratio

A valuation ratio of a company's current share price compared to its per-share earnings, used to evaluate if a stock is over or undervalued.