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During a recent week, Cairns Consulting received $15,000 cash from clients for services performed with a total value of $50,000.The balance is to be received within 30 days.
-The effect of this transaction in the accounting records would be:
A)+ $50,000 revenue = + $15,000 cash + $35,000 accounts receivable
B)+ $35,000 net income = + $35,000 assets
C)+ $15,000 revenue = + $15,000 cash
D)+ $50,000 revenue = + $50,000 accounts receivable

Question

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During a recent week, Cairns Consulting received $15,000 cash from clients for services performed with a total value of $50,000.The balance is to be received within 30 days.
-The effect of this transaction in the accounting records would be:
A)+ $50,000 revenue = + $15,000 cash + $35,000 accounts receivable
B)+ $35,000 net income = + $35,000 assets
C)+ $15,000 revenue = + $15,000 cash
D)+ $50,000 revenue = + $50,000 accounts receivable

Quizplus · Accepted Answer

The transaction involves Cairns Consulting receiving $15,000 cash and providing services with a total value of $50,000. Therefore, the revenue recognized would be $50,000, and the cash received would be recognized as a debit to cash, increasing the asset account by $15,000. However, since the total value of the services is $50,000 and only $15,000 has been received in cash, there is also a debit to accounts receivable of $35,000, which represents the amount that is still owed by clients and is expected to be collected within 30 days. The net effect is an increase in revenue of $50,000, an increase in cash of $15,000, and an increase in accounts receivable of $35,000, which is correctly reflected in option A.

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