During 2015, Maverick Law Firm had the following transactions with it clients (customers):
-On February 1, 2015, the company received cash of $5,000 from clients in payment of their account balances as of December 31, 2014.
-On November 1, 2015, the company received $2,000 cash as payments in advance for law services to be performed in 2016.
-The company received a total of $13,000 in cash for law services that were performed during 2015.
-The company sent bills totaling $4,000 to clients for services performed during 2015; this amount was unpaid as December 31, 2015.
-Use the information above to answer the following question.Based on the activities above,as a result of these transactions during 2015,the law firm's stockholders' equity will:

Question

Quizplus · Accepted Answer

The law firm's stockholders' equity will increase by $17,000. 
- $5,000 received on February 1 is payment for outstanding account balances and will not affect stockholders' equity.
- $2,000 received on November 1 is a payment in advance and will be recorded as a liability until services are performed in 2016, so it does not affect stockholders' equity in 2015.
- $13,000 received for law services performed during 2015 increases the firm's revenues and subsequently increases stockholders' equity.
- $4,000 of unpaid bills from services performed in 2015 will increase the firm's accounts receivable and subsequently increase stockholders' equity.

Therefore, the total increase in stockholders' equity is $13,000 + $4,000 = $17,000.

During 2015, Maverick Law Firm Had the Following Transactions with It