HelpSave & ExitSubmitThe Fastbank Motorcycle Company (FMC) receives a $10 million order from dealers wanting to buy its most popular model oncredit. No money changes hands. Due to excess demand, FMC cannot supply the motorcycles until next quarter. How will theseevents affect the balance sheet?Multiple ChoiceBoth Accounts Receivable and Shareholders' Equity will increase by $10 million this quarter.These events will not impact the balance sheet this quarter.Accounts Receivable will increase by $10 million this quarter and Inventories will decrease next querter hal_browser%3D0&launchUrl=https%25.QUIZ Rev iSavedBoth Accounts Receivable and Shareholders' Equity will increase by $10 million this quarter.These events will not impact the balance sheet this quarter.Accounts Receivable will increase by $10 million this quarter and Inventories will decrease next quarter.Both Accounts Receivable and Accounts Payable will increase by $10 million this quarter.

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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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Save & Exit
Submit
The Fastbank Motorcycle Company (FMC) receives a $10 million order from dealers wanting to buy its most popular model on
credit. No money changes hands. Due to excess demand, FMC cannot supply the motorcycles until next quarter. How will these
events affect the balance sheet?
Multiple Choice
Both Accounts Receivable and Shareholders' Equity will increase by $10 million this quarter.
These events will not impact the balance sheet this quarter.
Accounts Receivable will increase by $10 million this quarter and Inventories will decrease next querter

hal_browser%3D0&launchUrl=https%25.
QUIZ Rev i
Saved
Both Accounts Receivable and Shareholders' Equity will increase by $10 million this quarter.
These events will not impact the balance sheet this quarter.
Accounts Receivable will increase by $10 million this quarter and Inventories will decrease next quarter.
Both Accounts Receivable and Accounts Payable will increase by $10 million this quarter.

Expert Solution

Introduction

Question says that the order received but there is no commencement of production or advance receipt in relation to order. Since there is no action there wont be any impact on the balance sheet during the quarter. But the organisation keep a track of these orders.

Revenue to be recognized when there is sale/services rendered and expected to be realized as per the GAAP.

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