During 2019,Ocean Consulting had the following transactions with it clients (customers): On February 1,2019,the company received cash of $10,000 from clients in payment of their account balances as of December 31,2018.
On November 1,2019,the company received $4,000 cash as payments in advance for services to be performed in 2020.
The company received a total of $26,000 in cash for services that were performed during 2019.
The company sent bills totaling $8,000 to clients for services performed during 2019;this amount was unpaid as December 31,2019.
As a result of these transactions during 2019,the firm's stockholders' equity will:
A)increase by $40,000.
B)decrease by $10,000.
C)increase by $34,000.
D)decrease by $4,000.

Question

Quizplus · Accepted Answer

Revenues increase net income,which increases stockholders' equity.The requirement under accrual basis accounting is to record revenues when the performance obligation is satisfied.Total revenue earned in 2019 = $26,000 + $8,000 = $34,000,which also equals the increase in stockholders' equity from those revenues.

During 2019,Ocean Consulting Had the Following Transactions with It Clients