wheaton co. performed services for a customer on account. indicate whether each of the following statements…

wheaton co. performed services for a customer on account. indicate whether each of the following statements about this transaction is true or false.\na) assets and equity both increase when the revenue is recognized.\nb) this transaction did not affect cash flows.\nc) the company recorded an increase in revenue and a decrease in accounts receivable.\nd) recognition of revenue would be delayed until cash was collected.\ne) this transaction is an example of an asset exchange transaction.

wheaton co. performed services for a customer on account. indicate whether each of the following statements about this transaction is true or false.\na) assets and equity both increase when the revenue is recognized.\nb) this transaction did not affect cash flows.\nc) the company recorded an increase in revenue and a decrease in accounts receivable.\nd) recognition of revenue would be delayed until cash was collected.\ne) this transaction is an example of an asset exchange transaction.

Answer

Brief Explanations:

a) When services are performed on - account, accounts receivable (an asset) increases and revenue (which increases equity) increases. So, this is true. b) Since it's on - account, no cash is exchanged immediately, so cash flows are not affected. This is true. c) When services are performed on - account, revenue increases and accounts receivable increases, not decreases. So, this is false. d) Under accrual accounting, revenue is recognized when earned, not when cash is collected. So, this is false. e) An asset - exchange transaction involves the exchange of one asset for another. Here, a service is performed on - account, creating an accounts receivable and recognizing revenue, not an asset - exchange. So, this is false.

Answer:

a) True b) True c) False d) False e) False