Purchase of machinery for cash:Question 3Answera.Increases total assetsb.Increases assets and liabilitiesc.Keeps total assets unchangedd.Decreases total assets
Question
Purchase of machinery for cash:Question 3Answera.Increases total assetsb.Increases assets and liabilitiesc.Keeps total assets unchangedd.Decreases total assets
Solution
The correct answer is c. Keeps total assets unchanged.
Here's why:
When a company purchases machinery for cash, it is essentially converting one type of asset (cash) into another type (machinery). The cash account decreases while the machinery (or equipment) account increases.
The total amount of assets before and after the transaction remains the same, assuming the purchase doesn't result in any immediate depreciation or other adjustments. Therefore, the purchase of machinery for cash keeps total assets unchanged.
Liabilities are not affected by this transaction as no borrowing or credit is involved. Hence, options a, b, and d are incorrect.
Similar Questions
When an organisation purchases a machine for cash, which of the following is true?Question 3Select one:a.Total assets increase.b.Total liabilities decrease.c.Total expenses increase.d.Total equity stays the same
Which of the following will increase cash flow?Working capital requirements decreaseEstimate of salvage value increasesDepreciation expenses increaseNone of the aboveAll of the above
The cash payment of a liability: Question 3 Answer Increases assets and decreases liabilities. Decreases assets and increases liabilities. Decreases assets and liabilities. Decreases assets and equity.
Acquisition of supplies under asset method for cash does not affect total assetsGroup of answer choicesTrueFalse
Which of the following statements is correct?1 pointThe purchase of new machinery decreases cash from operations.The repayment of a bank loan decreases cash from investing.Cash flow from operations increases when we recognize a credit sale.A payment of dividends decreases cash from financing.
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.