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23 November, 11:46

Bledsoe Company received $15,000 cash from the issue of stock on January 1, 2013. During 2013 Year 1, Bledsoe earned $8,500 of revenue on account. The company collected $6,000 cash from accounts receivable and paid $5,400 cash for operating expenses. Based on this information alone, during Year 1.

a) total asset increased by $24,100.

b) total asset increased by $600.

c) total asset increased by $18,100.

d) total asset did not change.

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  1. 23 November, 11:48
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    (C) total asset increased by $18,100

    Explanation:

    The effects of the events on assets, liabilities and equity are as follows.

    Bledsoe Company received $15,000 cash from the issue of stock on January 1, 2013

    Assets (cash) increase by $15,000; Equity increase by $15,000.

    During 2013 Year 1, Bledsoe earned $8,500 of revenue on account.

    Assets (cash; receivables) increase by $8,500; Equity (profit) increase by $8,500.

    The company collected $6,000 cash from accounts receivable

    Assets (cash) increase by $6,000; Assets (receivables) decrease by $6,000.

    The company paid $5,400 cash for operating expenses

    Assets (cash) decrease by $5,400; Equity (increasing expenses is reducing profit) decreases by $5,400.

    Net effect: + 15,000 + 8,500 + 6,000 - 6,000 - 5,400 = + 18,000

    Therefore, total assets will increase by $18,100.
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