Cost of the asset$100,000
Life of the asset 5 years
Depreciation rate20%
Capital cost allowance rate 50%
Residual value of the asset nil
Income tax rate 50%
-An entrepreneur collects $13,000 cash for services previously rendered. What is the effect on the financial statements?
A) Current assets increase and revenue increases.
B) Current assets increase and current liabilities increase.
C) Current assets decrease and revenue increases.
D) Current assets increase and current assets decrease.

Question

Cost of the asset$100,000 
Life of the asset 5 years 
Depreciation rate20% 
Capital cost allowance rate 50% 
Residual value of the asset nil 
Income tax rate 50%
-An entrepreneur collects $13,000 cash for services previously rendered. What is the effect on the financial statements?
A) Current assets increase and revenue increases.
B) Current assets increase and current liabilities increase.
C) Current assets decrease and revenue increases.
D) Current assets increase and current assets decrease.

Quizplus · Accepted Answer

Collecting cash for services previously rendered increases current assets (cash) and also increases revenue, reflecting the income earned from the services.

Cost of the Asset$100,000