Question

This month, a company performed $533,000 of services and incurred total expenses of $439,600. The company was paid in cash for all its services and paid cash for all its expenses. These transactions would cause:

revenues to increase by $533,000, expenses to increase by $439,600, and retained earnings to decrease by $93,400.

revenues to increase by $93,400, expenses to increase by $439,600, and cash to increase by $533,000.

cash to increase by $533,000, expenses to increase by $439,600, and common stock to increase by $93,400.

revenues to increase by $533,000, expenses to increase by $439,600, and cash to increase by $93,400.

Answer 1

This transaction will cause revenues to increase by $533,000, expenses to increase by $439,600, and cash to increase by $93,400. Journal entries prepared will be as follows:

Date	Particulars	L.F	Amount ($)	Amount ($)
1	Cash		533,000
	Service Revenue			533,000
	(For services performed)
2	Operating Expenses		439,600
	Cash			439,600
	(for expenses incurred)

Now A is wrong as retained earnings will increase by $93,400.

B is wrong as revenue will increase by 533,000 and cash will increase by $93,400.

C is wrong as cash will increase by 93,400 and common stock will not increase by these transactions.

Correct answer is D.