Question

Bledsoe Company received $15,000 cash from the issue of stock on January 1, 2013. During 2013 Year 1, Bledsoe earned $8,500 of revenue on account. The company collected $6,000 cash from accounts receivable and paid $5,400 cash for operating expenses. Based on this information alone, during Year 1.
a) total asset increased by $24,100.
b) total asset increased by $600.
c) total asset increased by $18,100.
d) total asset did not change.

Answer 1

Answer:

(C) total asset increased by $18,100

Explanation:

The effects of the events on assets, liabilities and equity are as follows.

Bledsoe Company received $15,000 cash from the issue of stock on January 1, 2013

Assets (cash) increase by $15,000; Equity increase by $15,000.

During 2013 Year 1, Bledsoe earned $8,500 of revenue on account.

Assets (cash; receivables) increase by $8,500; Equity (profit) increase by $8,500.

The company collected $6,000 cash from accounts receivable

Assets (cash) increase by $6,000; Assets (receivables) decrease by $6,000.

The company paid $5,400 cash for operating expenses

Assets (cash) decrease by $5,400; Equity (increasing expenses is reducing profit) decreases by $5,400.

Net effect: +15,000 + 8,500 + 6,000 - 6,000 - 5,400 = +18,000

Therefore, total assets will increase by $18,100.