Atkins Company Collected $1,750 as Payment for the Amount Owed

question 170

Multiple Choice

Atkins Company collected $1,750 as payment for the amount owed by a customer from services provided the prior month on credit. How does this transaction affect the accounting equation for Atkins?

• A) Assets would increase $1,750 and equity would increase $1,750.
• B) Liabilities would decrease $1,750 and equity would increase $1,750.
• C) One asset would increase $1,750 and a different asset would decrease $1,750, causing no net change in the accounting equation.
• D) Assets would decrease $1,750 and liabilities would decrease $1,750.
• E) Assets would increase $1,750 and liabilities would increase $1,750.

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Definitions:

Contra Asset

An account that offsets an associated asset account, with common examples being accumulated depreciation and allowance for doubtful accounts.

Fair Value Adjustment

Fair value adjustment is an accounting process to adjust the book value of assets or liabilities to their fair value.

Security Portfolio

A collection of investments held by an individual or an institution which may include stocks, bonds, mutual funds, or other investments.

Accounting Period

A time frame for which financial statements are prepared, typically a year, quarter, or month, to measure a company's financial performance.