Question

Wisconsin Company collected $42,000 cash on its accounts receivable. The effects of this transaction are: Multiple Choice Both total assets and equity are unchanged and liabilities increase. Both total assets and total liabilities decrease. Total assets decrease and equity increases. Total assets increase and equity decreases.

Answer 1

Answer:

Option Total assets, total liabilities, and equity are unchanged.

Explanation:

The reason is that the double entry to record this transaction is as under:

Dr Cash Account       $42,000

Cr Accounts Receivable $42,000

Hence there increase in one asset and decrease in other asset will have zero net impact on assets. As equity and liabilities are not effected by the transaction, hence they will also remain unchanged.