Cushion Sports Accepted a Credit Card Account Receivable in Exchange

question 183

Multiple Choice

Cushion Sports accepted a credit card account receivable in exchange for $5,000 of services provided to a customer.The credit card company charges a 5% service charge.Recording the transaction in the company's accounting records will have what effect on the accounting equation?

• A) Increase assets and equity by $4,750
• B) Decrease assets and equity by $250
• C) Increase assets by $5,000
• D) Increase equity by $5,000

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Definitions:

Tax Rate

The proportion of income that the government takes as tax from an individual or a company.

Accrual-based Consolidated Net Income

The net income of a consolidated group of companies, calculated using the accrual method of accounting, which records revenues and expenses when they are incurred, regardless of cash movement.

Proportionate Book Value

The value of a company based on its balance sheet, where assets and liabilities are proportionately adjusted to reflect its actual market value.

Trademarks

Identifiable symbols, logos, or names used by companies to distinguish their products or services from those of others.