This month,a company performed $517,000 of services and incurred total expenses of $438,000.If the company was paid in cash for all its services and paid cash for all its expenses,these transactions would cause:
A)revenues to increase $517,000,expenses to increase $438,000,and retained earnings to decrease $79,000.
B)cash to increase $517,000,expenses to increase $438,000,and contributed capital to increase $79,000.
C)revenues to increase $517,000,expenses to increase $438,000,and cash to increase $79,000.
D)revenues to increase $79,000,expenses to increase $438,000,and cash to increase $517,000.

Question

Quizplus · Accepted Answer

When a company performs services and receives cash payments, revenues increase by the amount of cash received. Therefore, revenues would increase by $517,000. Additionally, when the company incurs expenses and pays them in cash, expenses increase by the amount of cash paid. Therefore, expenses would increase by $438,000. Finally, since the company received more cash from the services performed than it paid out in expenses, cash would increase by the difference between the two amounts, which is $79,000. There is no mention of any impact on contributed capital or retained earnings in this scenario.

This Month,a Company Performed $517,000 of Services and Incurred Total