A Transaction Caused a $60,000 Increase in Both Assets and Total

question 5

Multiple Choice

A transaction caused a $60,000 increase in both assets and total liabilities. This transaction could have been which of the following?

• A) Purchase of office equipment for $60,000 cash.
• B) Purchase of office equipment for $120,000, paying $60,000 cash and issuing a note payable for the balance.
• C) Repayment of a $60,000 bank loan.
• D) Investment of $60,000 cash in the business by the owner.

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Definitions:

Operating Income

The profit realized from a business's operations after subtracting operating expenses from gross profit, indicating the efficiency of core business activities.

Absorption Costing

A costing method where all of the costs associated with manufacturing a product are absorbed by the units produced, including both variable and fixed manufacturing costs.

Operating Income

Earnings before interest and taxes (EBIT), representing the profit a company makes from its core operations.

Capacity

The maximum amount of work that an organization is capable of completing in a given period of time.