Touch Tronix, Inc

question 231

Multiple Choice

Touch Tronix, Inc. sells component parts to Advanced Communications, Inc. a cell phone manufacturer. During December 2014, Touch Tronix, Inc. sold €1,020,000 of goods to Advanced Communications, Inc. on account for €1,320,000. Advanced Communications, Inc. was dissatisfied with 25% of the merchandise it received due to inferior quality. On December 21, 2014, Advanced Communications, Inc. returns the goods to Touch Tronix, Inc. for credit. Which of the following is true regarding the statement of financial position for Advanced Communications, Inc. at December 31, 2014?

• A) Assets will increase by €255,000 and liabilities will increase by €255,000.
• B) Assets will decrease by €255,000 and liabilities will decrease by €255,000.
• C) Assets will decrease by €330,000 and liabilities will decrease by €330,000. d Assets will increase by €330,000 and liabilities will increase by €330,000.

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Definitions:

Bond Financing

Raising capital for a business or governmental entity through the issuance of bonds, which are debt securities that must be repaid with interest.

Owner Control

The level of power and authority held by the owner(s) of a business in making significant decisions about its operations.

Lessee

A person or entity that rents or leases property from another, known as the lessor, under the terms of a lease agreement.

Lessor

The party that leases or rents out a property or asset to another party, known as the lessee.