Forest Beach Company experienced an event that had the following effects on its financial statements. Which of the following events could have caused these effects?

Question

Forest Beach Company experienced an event that had the following effects on its financial statements.  Which of the following events could have caused these effects?

Quizplus · Accepted Answer

The increase in cash and reduction in notes receivable indicates that Forest Beach Company collected cash for the principal balance of a note receivable. Option A would only affect the income statement and not the balance sheet. Option B would only affect the balance sheet if the employee signed a note payable promising to repay the loan. Option D would increase cash but also increase liabilities, hence it would have a different effect on the financial statements.

Forest Beach Company Experienced an Event That Had the Following