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During a recent week, McMunn Legal Services received $25,000 cash from clients for services performed with a total value of $75,000. The balance is to be received within 30 days.
-The effect of this transaction in the accounting records would be
A)+ $75,000 revenue = + $25,000 cash + $50,000 accounts receivable.
B)+ $50,000 net income = + $50,000 assets.
C)+ $25,000 revenue = + $25,000 cash.
D)+ $75,000 revenue = + $75,000 accounts receivable.

Question

Quizplus · Accepted Answer

The transaction involves receiving $25,000 in cash and earning $75,000 in revenue for services performed. Since only $25,000 was received in cash, the remaining $50,000 is recorded as accounts receivable (meaning it is owed by clients and expected to be received within 30 days). Therefore, the effect on the accounting records is + $75,000 revenue = + $25,000 cash + $50,000 accounts receivable.

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