During 20B,Blue Corporation incurred operating expenses amounting to $100,000,of which $75,000 were paid in cash; the balance will be paid in January 20C.Transaction analysis of operating expenses for 20B,should reflect which of the following?
A)decrease shareholders' equity,$75,000; decrease assets,$75,000.
B)decrease assets,$100,000; decrease shareholders' equity,$100,000.
C)decrease assets,$100,000; increase liabilities,$25,000; decrease shareholders' equity,$100,000.
D)decrease shareholders' equity,$100,000; decrease assets,$75,000; increase liabilities,$25,000.

Question

Quizplus · Accepted Answer

Operating expenses are a part of the income statement and represent costs incurred by the company in generating revenue. In this case, $100,000 operating expenses were incurred during 20B, of which $75,000 were paid in cash, and the remaining $25,000 will be paid in the following year.

Therefore, the entry to record the operating expenses for 20B will be a decrease in shareholders' equity and an increase in liabilities (accounts payable) and corresponding decrease in assets (cash). The $75,000 paid in cash will decrease both assets (cash) and shareholders' equity, while the remaining $25,000 will only decrease shareholders' equity.

Hence, the correct choice is D, which is a decrease in shareholders' equity ($100,000), a decrease in assets ($75,000 - paid in cash), and an increase in liabilities ($25,000 - accounts payable).

During 20B,Blue Corporation Incurred Operating Expenses Amounting to $100,000,of Which