Stannous Company earns $2,000 of revenue on account in Year 1. Cash collections

Question

Stannous Company earns $2,000 of revenue on account in Year 1. Cash collections of receivables amount to $1,800 in Year 1 with the remainder being collected in Year 2. Which of the following shows how these events will affect the company’s ledger accounts when cash is collected in Year 1?

A

B

C

D^

Stannous Company earns $2,000 of revenue on account in Year 1. Cash collections of receivables amount to $1,800 in Year 1 with the remainder being collected in Year 2. Which of the following shows how these events will affect the company’s ledger accounts when cash is collected in Year 1?

Explanation / Answer

Assets = Liabilities + Stockholders’ Equity Cash + Accounts = Accounts + Common + Retained Receivable Payable Stock Earnings 1,800 -1,800 Option C is correct

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