Stannous Company earns 2000 of revenue on account in Year 1

Stannous Company earns $2,000 of revenue on account in Year 1. Cash collections of receivables amount to $1,800 in Year 1 with the remainder being collected in Year 2. Which of the following shows how these events will affect the company’s ledger accounts when cash is collected in Year 1?

A

B

C

D^

Stannous Company earns $2,000 of revenue on account in Year 1. Cash collections of receivables amount to $1,800 in Year 1 with the remainder being collected in Year 2. Which of the following shows how these events will affect the company’s ledger accounts when cash is collected in Year 1?

Solution

Assets = Liabilities + Stockholders’ Equity Cash + Accounts = Accounts + Common + Retained Receivable Payable Stock Earnings 1,800 -1,800 Option C is correct