Question

Breeze Inc. receives payment of $800,000 for 4 wind turbines that were delivered and invoiced on credit in the previous month. How would this receipt impact the accounting equation of Breeze Inc.?

Answer 1

Answer:

No impact on accounting equation of Breeze Inc.

Explanation:

Account equation: Asset = Liabilities + Shareholders' equity

Upon delivery and invoicing of the 4 wind turbines, the Breeze Inc. had recognized following journal entry:

An asset is recorded

Accounts receivable (Debit)

Sales (Credit)

Upon receipt of cash, accounts receivable is credited and cash is credited e.g. there is no impact on total assets, therefore there is no impact on accounting equation.