A company's January 1, 2016 balance sheet reported total assets of $150,000 and total liabilities of $60,000. During January 2016, the company completed the following transactions: (A) paid a note payable using $10,000 cash (no interest was paid); (B) collected a $9,000 accounts receivable; (C) paid a $5,000 accounts payable; and (D) purchased a truck for $5,000 cash and by signing a $20,000 note payable from a bank. The company's January 31, 2016 balance sheet would report which of the following?

Question

Quizplus · Accepted Answer

- Transaction (A) has no effect on the balance sheet as it only involves a cash outflow and a reduction in liabilities, which cancel each other out.
- Transaction (B) increases cash and reduces accounts receivable, resulting in an increase in total assets and no change in liabilities.
- Transaction (C) decreases cash and accounts payable, resulting in a decrease in total assets and no change in liabilities.
- Transaction (D) increases the truck asset by $5,000 and increases the note payable liability by $20,000, resulting in a net increase in total assets of $5,000 and a net increase in total liabilities of $20,000.
Overall, the net effect of the transactions is an increase in total assets of $4,000 ($9,000 - $5,000) and an increase in total liabilities of $20,000. Therefore, the January 31, 2016 balance sheet would report total assets of $154,000 ($150,000 + $4,000) and total liabilities of $80,000 ($60,000 + $20,000), which corresponds to choice B.

A Company's January 1, 2016 Balance Sheet Reported Total Assets