Comments on: Update on My Acct 301 Pretest http://mylifedump.com/2007/01/22/update-on-my-acctg-301-pretest/ Dumping Life.... One Thought at a Time.... Sat, 28 Aug 2010 09:02:00 +0000 hourly 1 http://wordpress.org/?v=3.0.1 By: :D Jen http://mylifedump.com/2007/01/22/update-on-my-acctg-301-pretest/comment-page-3/#comment-48643 :D Jen Sat, 28 Aug 2010 09:02:00 +0000 http://www.mylifedump.com/2007/01/22/update-on-my-acctg-301-pretest/#comment-48643 wish me good luck tomorrow everyone! I wish with everything I have in my life that I will pass the test tomorrow!! :D wish me good luck tomorrow everyone! I wish with everything I have in my life that I will pass the test tomorrow!! :D

]]> By: business plan http://mylifedump.com/2007/01/22/update-on-my-acctg-301-pretest/comment-page-3/#comment-48394 business plan Mon, 23 Aug 2010 02:14:00 +0000 http://www.mylifedump.com/2007/01/22/update-on-my-acctg-301-pretest/#comment-48394 Congratulations Jennifer! Congratulations Jennifer!

]]> By: DoctorMontalban http://mylifedump.com/2007/01/22/update-on-my-acctg-301-pretest/comment-page-3/#comment-48395 DoctorMontalban Fri, 20 Aug 2010 23:23:00 +0000 http://www.mylifedump.com/2007/01/22/update-on-my-acctg-301-pretest/#comment-48395 In your example the net change to assets would be $64k, which isn't what the question presented. Per the question, the net increase in assets has to be $80k, not $64k. The liability sits on the balance sheet as a claim against those assets, so for a +80 net change in assets to occur, assets had to be $96k prior to the claim. That $96k would've come from revenue or investment, as you mention, keeping the: $80k (A) = -16k (L) + 96k (O.E.) equation in tact (which it always must be). In your example the net change to assets would be $64k, which isn’t what the question presented. Per the question, the net increase in assets has to be $80k, not $64k.

The liability sits on the balance sheet as a claim against those assets, so for a +80 net change in assets to occur, assets had to be $96k prior to the claim. That $96k would’ve come from revenue or investment, as you mention, keeping the: $80k (A) = -16k (L) + 96k (O.E.) equation in tact (which it always must be).

]]> By: business plan http://mylifedump.com/2007/01/22/update-on-my-acctg-301-pretest/comment-page-3/#comment-47929 business plan Fri, 20 Aug 2010 00:27:00 +0000 http://www.mylifedump.com/2007/01/22/update-on-my-acctg-301-pretest/#comment-47929 What you said makes sense as well. This question is especially tricky because it can be interpreted in different ways. Here is another way of looking at the problem -- lol Company gets $80,000 in Cash through either investment or Revenue. The result is that Owner's Equity is increased by $80,000. Then we pay the liability, we debit it and credit cash. There is no effect on owner's equity in the end. So the only thing that happened (from the given information) was that Owner's Equity increased by $80,000. In this case, the answer would be "None of the above." What you said makes sense as well.

This question is especially tricky because it can be interpreted in different ways.

Here is another way of looking at the problem — lol

Company gets $80,000 in Cash through either investment or Revenue. The result is that Owner’s Equity is increased by $80,000. Then we pay the liability, we debit it and credit cash. There is no effect on owner’s equity in the end. So the only thing that happened (from the given information) was that Owner’s Equity increased by $80,000.

In this case, the answer would be “None of the above.”

]]> By: DoctorMontalban http://mylifedump.com/2007/01/22/update-on-my-acctg-301-pretest/comment-page-3/#comment-47898 DoctorMontalban Thu, 19 Aug 2010 07:45:00 +0000 http://www.mylifedump.com/2007/01/22/update-on-my-acctg-301-pretest/#comment-47898 It could also be a $96k investment to the business, which would increase O.E. by 96k and assets (cash) by the same amount; with a $16k decrease of liabilities and a reduction in cash (bringing the increase to 80k), keeping the accounting equation in tact. It could also be a $96k investment to the business, which would increase O.E. by 96k and assets (cash) by the same amount; with a $16k decrease of liabilities and a reduction in cash (bringing the increase to 80k), keeping the accounting equation in tact.

]]> By: business plan http://mylifedump.com/2007/01/22/update-on-my-acctg-301-pretest/comment-page-3/#comment-47831 business plan Thu, 19 Aug 2010 00:32:00 +0000 http://www.mylifedump.com/2007/01/22/update-on-my-acctg-301-pretest/#comment-47831 This problem is tricky. Let me take another shot at it. It looks like It would have an effect on the Owner's Equity for the given amount, but the choice in the answer is "Owner's equity is INCREASED by $96,000" which is not the case. We know only 4 things effect OE - Investments, Revenue, Expenses and Withdrawals. When they recorded the liability, they increased the expenses. This would have DECREASED Owner's Equity. So, when the company gets $80,000 through whatever (Service revenue or Investment), Owner's Equity is changed (increased) by $80,000. When we pay the $16,000 in Liabilities, we debit the Liability and credit Cash.. which has no effect on Owner's Equity. The expense that was recorded when the liability was credited, it would have lowered Owner's Equity at that point in time. Even keeping that in mind, Owner's Equity would have been --increased-- by $96,000 as per one of the answers. So while the Owner's Equity was effected by $96,000.. it was not increased by that amount. It was increased by $64,000 ($80,000 - 16000) This COULD mean the answer was (B) Net income increased by $64,000 if no other transactions in that period took place. But it is safe to assume that realistically that won't be the case. In the end, you can only say that we have no idea how owner's equity is effected. Please fix my reasoning if I am wrong. This problem is tricky. Let me take another shot at it.

It looks like It would have an effect on the Owner’s Equity for the given amount, but the choice in the answer is “Owner’s equity is INCREASED by $96,000″ which is not the case.

We know only 4 things effect OE – Investments, Revenue, Expenses and Withdrawals.
When they recorded the liability, they increased the expenses. This would have DECREASED Owner’s Equity.

So, when the company gets $80,000 through whatever (Service revenue or Investment), Owner’s Equity is changed (increased) by $80,000.

When we pay the $16,000 in Liabilities, we debit the Liability and credit Cash.. which has no effect on Owner’s Equity. The expense that was recorded when the liability was credited, it would have lowered Owner’s Equity at that point in time. Even keeping that in mind, Owner’s Equity would have been –increased– by $96,000 as per one of the answers.

So while the Owner’s Equity was effected by $96,000.. it was not increased by that amount. It was increased by $64,000 ($80,000 – 16000)

This COULD mean the answer was (B) Net income increased by $64,000 if no other transactions in that period took place. But it is safe to assume that realistically that won’t be the case.

In the end, you can only say that we have no idea how owner’s equity is effected.

Please fix my reasoning if I am wrong.

]]> By: business plan http://mylifedump.com/2007/01/22/update-on-my-acctg-301-pretest/comment-page-3/#comment-47832 business plan Wed, 18 Aug 2010 17:14:00 +0000 http://www.mylifedump.com/2007/01/22/update-on-my-acctg-301-pretest/#comment-47832 Anytime my friend. - Singh Anytime my friend.

- Singh

]]> By: business plan http://mylifedump.com/2007/01/22/update-on-my-acctg-301-pretest/comment-page-3/#comment-47775 business plan Wed, 18 Aug 2010 02:23:00 +0000 http://www.mylifedump.com/2007/01/22/update-on-my-acctg-301-pretest/#comment-47775 Anyone taking 301 with J OSHAUGHNESSY MW 2:10PM this semester (Fall 10)? Anyone taking 301 with J OSHAUGHNESSY MW 2:10PM this semester (Fall 10)?

]]> By: DoctorMontalban http://mylifedump.com/2007/01/22/update-on-my-acctg-301-pretest/comment-page-3/#comment-47776 DoctorMontalban Tue, 17 Aug 2010 09:34:00 +0000 http://www.mylifedump.com/2007/01/22/update-on-my-acctg-301-pretest/#comment-47776 I'm with you. Even if it was 100 = 30 + 70, an increase of 80k in assets on one side, and a decrease of 16k in liabilities on the other, it would have a +96k effect on O.E., per the accounting equation. I’m with you. Even if it was 100 = 30 + 70, an increase of 80k in assets on one side, and a decrease of 16k in liabilities on the other, it would have a +96k effect on O.E., per the accounting equation.

]]> By: JenniferC http://mylifedump.com/2007/01/22/update-on-my-acctg-301-pretest/comment-page-3/#comment-47777 JenniferC Tue, 17 Aug 2010 05:46:00 +0000 http://www.mylifedump.com/2007/01/22/update-on-my-acctg-301-pretest/#comment-47777 Thank you businessplan and Ben. I checked my test report today and I passed with a 22. Phew! Thank you businessplan and Ben. I checked my test report today and I passed with a 22. Phew!

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