During 2016, Millstone Company earned $6,500 of cash revenue, paid cash dividends of $1,000 to owners and paid $4,000 for cash expenses. Liabilities were unchanged. What accurately describes the effect of these events on the elements of the company's financial statements?

Question

Leonidas Maxwell

Business

3 January, 22:36

During 2016, Millstone Company earned $6,500 of cash revenue, paid cash dividends of $1,000 to owners and paid $4,000 for cash expenses. Liabilities were unchanged. What accurately describes the effect of these events on the elements of the company's financial statements?

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Litzy Robertson · Answer 1

a) the fees revenue will increase assets for 6,500

the earnings for 6,500 as the company is receiving this cash for services rendered.

And the cahs flow will increase for 6,500 as well as this fees are collected.

b) the dividend paid decrease equity as the cash leaves the company in favor of his owners.

no effect on the net income as this is neither an expense or income

it will decrease the cash by 10,000

c) the expenses will decrease the earnings by 4,500 as they are incurrend cost to operate the business.

it will decrease assets by 4,500 as the cash is no longer in the company

and the cash flow will also decrease by 4,500