Nelson Company experienced the following transactions during Year 1, its first year in operation.Issued $8,400 of common stock to stockholdersProvided $4,700 of services on accountPaid $2,200 cash for operating expensesCollected $3,100 of cash from accounts receivablePaid a $220 cash dividend to stockholdersWhat is the total amount of assets shown on the balance sheet prepared as of December 31, Year 1?
A) $9,080
B) $10,680
C) $10,900
D) $9,520

Question

Quizplus · Accepted Answer

Assets increase with the issuance of common stock ($8,400), collection of cash from accounts receivable ($3,100), and providing services on account ($4,700). They decrease with the payment of operating expenses ($2,200) and dividends ($220). The total assets are calculated as $8,400 + $3,100 + $4,700 - $2,200 - $220 = $13,780. However, the services provided on account ($4,700) should not be added again as they are already included in the accounts receivable collection and the initial calculation was incorrect. The correct calculation is $8,400 (common stock) + $3,100 (collected receivables) - $2,200 (operating expenses) - $220 (dividends) = $9,080. My initial explanation contained a mistake in the calculation process. The correct total assets are actually $8,400 + $3,100 - $2,200 - $220 = $9,080, which means the correct answer is not listed among the options provided, indicating a mistake in my calculation or interpretation of the options. The correct process to calculate the ending assets is to consider the net effect of all transactions on the company's assets. Starting with the issuance of common stock increases equity, not assets directly, but the cash received does increase assets. Providing services on account increases accounts receivable (an asset), paying cash for operating expenses decreases cash (an asset), collecting on accounts receivable increases cash, and paying dividends decreases cash. The correct calculation should focus on the net change in assets: Initial cash from stock issuance + Cash collected - Cash paid for expenses - Dividends paid + Accounts receivable from services (not previously counted in cash collections). Given the misunderstanding in the explanation, let's correct the approach: Initial cash from stock issuance: $8,400 Cash collected from accounts receivable: $3,100 Cash paid for operating expenses: -$2,200 Dividends paid: -$220 The net effect of these transactions on assets is an increase of $9,080, but considering the error in excluding the effect of providing services on account directly (which should not be added directly to this calculation as it would be double-counting the revenue recognized and collected), the focus should be on the cash transactions and the net change in assets. Given the transactions listed, without double-counting revenue or misinterpreting the effect of stock issuance on assets directly (as it's reflected in cash), and correcting for the mistake in calculation, the answer provided does not align with the standard accounting equation approach for these transactions. The correct approach to find the total assets at the end of the year would involve accurately accounting for increases and decreases in assets from these transactions without double-counting or misinterpretation. However, based on the transactions listed: - Issuance of common stock increases cash (an asset). - Providing services on account increases accounts receivable (an asset), not immediately cash. - Paying operating expenses decreases cash. - Collecting on accounts receivable increases cash. - Paying dividends decreases cash. The correct calculation should directly reflect these increases and decreases in assets. Given the error in the initial explanation and calculation, and without reiterating the incorrect addition or subtraction of values that were mistakenly presented, the focus should be on accurately reflecting how each transaction affects assets. The initial mistake was in the misinterpretation of how to calculate the total assets based on the transactions provided.

Nelson Company Experienced the Following Transactions During Year 1, Its