Wheaton Co. performed services for a customer on account. Indicate whether each of the following statements about this transaction is true or false._____ a) Assets and equity both increase when the revenue is recognized. _____ b) This transaction did not affect cash flows. _____ c) The company recorded an increase in revenue and a decrease in accounts receivable. _____ d) Recognition of revenue would be delayed until cash was received. _____ e) This transaction is an example of an asset exchange transaction.
What will be an ideal response?
a) This is true. Assets (accounts receivable) and equity (revenue increases retained earnings) both increase.
b) This is true. Because cash is not affected, cash flows are not affected.
c) This is false. The event resulted in an increase in revenue and an increase in accounts receivable.
d) This is false. Kenyon would recognize revenue when the services are performed, not when cash is received.
e) This is false. Because assets (accounts receivable) increase, it is an asset source transaction.
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