Echols Company Sells Merchandise on Credit

question 199

Multiple Choice

Echols Company sells merchandise on credit. If a customer pays its balance due after the discount period has passed, what is the effect of the payment on seller's accounting equation?

• A)Assets and stockholders' equity decrease.
• B)Assets and stockholders' equity increase.
• C)Assets decrease and liabilities increase.
• D)No net effect.

---

Definitions:

Bankruptcy Proceeding

A legal process through which individuals or businesses that are unable to repay debts can seek relief from some or all of their obligations.

Environmental Impact Statement

A document prepared to describe the effects proposed projects will have on the environment, used to guide decision-making in project approval processes.

Chapter 11 Bankruptcy

A section of the United States Bankruptcy Code providing for reorganization, typically involving a corporation or partnership, under which a debtor proposes a plan to keep its business alive and pay creditors over time.

Debtor In Possession

A status in bankruptcy proceedings where the debtor maintains control of their property and business operations under court supervision.