Pumpkin Inc. sold $500 in pumpkins to a customer on account on January 1. On January 11, Pumpkin collected the cash from that customer. What is the impact on Pumpkin's accounting equation from the collection of cash?
A) No net effect to the accounting equation.
B) Decrease assets and increase liabilities.
C) Increase assets and increase liabilities.
D) Decrease assets and decrease liabilities.
Answer: A
A company receives a $50,000 cash deposit from a customer on October 15, but will not provide services until November 20. Which of the following statements is true?
A) The company records service revenue on October 15.
B) The company records cash collection on November 20.
C) The company records deferred revenue on October 15.
D) The company records nothing on October 15.
Answer: C
Which of the following would increase assets and increase liabilities?
A) Provide services to customers on account.
B) Purchase office supplies on account.
C) Pay dividends to stockholders.
D) Receive a utility bill for the current month. Plan to pay bill beginning of next month.
Answer: B
