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etained earnings) by $9,700

etained earnings) by $9,700

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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**Elliston Company Transaction Analysis** Elliston Company accepted credit card payments for $10,000 of services provided to customers. The credit card company charges a 3% fee for handling the transaction. Which of the following describes the effect of this transaction? **Multiple Choice Options:** 1. Increase stockholders’ equity (retained earnings) by $9,700 2. Increase revenue by $9,700 3. Increase net income by $10,000 4. Increase assets by $10,000 **Explanation:** - The transaction involves a $10,000 payment for services. - A 3% fee is applied, equating to $300. - The net income and stockholders’ equity likely reflect the revenue minus the fee. **Analysis:** Correctly understanding this requires recognizing that the fee will affect the net amount received and recorded as revenue or assets, not simply the gross amount of $10,000. The fee impacts financial statements by reducing the net amount Elliston Company gains from this transaction.
Transcribed Image Text:**Elliston Company Transaction Analysis** Elliston Company accepted credit card payments for $10,000 of services provided to customers. The credit card company charges a 3% fee for handling the transaction. Which of the following describes the effect of this transaction? **Multiple Choice Options:** 1. Increase stockholders’ equity (retained earnings) by $9,700 2. Increase revenue by $9,700 3. Increase net income by $10,000 4. Increase assets by $10,000 **Explanation:** - The transaction involves a $10,000 payment for services. - A 3% fee is applied, equating to $300. - The net income and stockholders’ equity likely reflect the revenue minus the fee. **Analysis:** Correctly understanding this requires recognizing that the fee will affect the net amount received and recorded as revenue or assets, not simply the gross amount of $10,000. The fee impacts financial statements by reducing the net amount Elliston Company gains from this transaction.
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