Question

Blue Company received a cash advance of $650 from a customer. As a result of this event, a. liabilities decreased by $650. b. assets and stockholders' equity increased by $650. c.) assets increased by $650. d. stockholders' equity increased by $650. Silver Company provided consulting services and billed the client $2,500. As a result of this event, a. assets remained unchanged. b. assets increased by $2,500. C. assets and stockholders' equity both increased by $2,500. C. stockholders' equity increased by $2,500.

Answer 1

Answer c. assets increased by $650 Working Notes: Debit Credit Journal entry for cash received in advance from customer Account Titles and Explanation Cash Unearned Service Revenue (To record cash received in advance from customer) $ 650 $ 650 Cash is increased $650 cash is is classified as a current assets shown under assets side of balance sheet. Unearned service revenue increased, it is shown under liabilities side of balance sheet. Answer c. assets and stockholders' equity both increased by $2,500. Working Notes: Credit Journal entry for cash received in advance from customer Account Titles and Explanation Accounts Receivables Consulting service revenue (To record cash received in advance from customer) Debit $ 650 $ 650 Accounts receivable is increased $650 account receivable is is classified as a current assets shown under assets side of balance sheet. Consulting revenue is shown under Income statement is revenue increased then automatically Stockholders equity is also increased.