The Fastbank Motorcycle Service Company (FMSC) wins a $10 million bid to provide the repair service for a recall on a popular brand of motorcycles. No money changes hands. The repairs are expected to take place next quarter. How will these events affect the balance sheet?
A) Accounts Receivable will increase by $10 million this quarter and Inventories will decrease next quart er.
B) Both Accounts Receivable and Accounts Payable will increase by $10 million this quarter.
C) Both Accounts Receivable and Stockholders' Equity will increase by $10 million this quarter.
D) These events will not impact the balance sheet this quarter.

Question

Quizplus · Accepted Answer

No money has changed hands, so there is no impact on the balance sheet this quarter. Once the repairs are completed, there may be an impact on Accounts Receivable and Inventories, but that will depend on the timing of payment and the cost of the repairs.

The Fastbank Motorcycle Service Company (FMSC) Wins a $10 Million