Knopp Company experienced an event that had the following effects on its financial statements. Balance sheet...
Knopp Company experienced an event that had the following effects on its financial statements.
| Balance sheet | Income Statement | Statement of Cash Flows |
||||||||
| Assets | = | Liabilities | + | Equity | Rev. | − | Exp. | = | Net Inc. | |
| + | NA | + | + | NA | + | + OA | ||||
Which of the following events would have caused these effects?
-
Earned cash revenue
-
Borrowed money
-
Purchased land with cash
-
Issued stock for cash
Homework Answers
Answer
Earned cash revenue
Explanation:
- When Cash revenue is earned, it means there are cash sales for the company.
- In the case of cash sales, Cash is received and income is received.
- So, assets (cash) is increased. Also, income is increased which increases equity.
- Revenue is increased and net profit also increases.
- This is also cash flow from operating activities.
The result of the above transaction is:
| Balance sheet | Income Statement | Statement of | ||||||||
| Assets | = | Liabilities | + | Equity | Rev. | − | Exp. | = | Net Inc. | Cash Flows |
| + | NA | + | + | NA | + | + OA | ||||
In case of any doubt, please comment.
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