Contessa Company collected $42,000 cash on its accounts receivable.The effects of this transaction as reflected in the accounting equation are:

A) Total assets decrease and equity increases.
B) Both total assets and total liabilities decrease.
C) Total assets,total liabilities,and total equity are unchanged.
D) Both total assets and equity are unchanged and liabilities increase.
E) Total assets increase and equity decreases.

Question

Macky Mahinay · Accepted Answer

Final Answer : C, Explanation :  The transaction involves only a collection of cash from accounts receivable. This means that there is no change in the amount of the accounts receivable asset, and there is an increase in the cash asset. The effect on equity is also zero, since there is no gain or loss associated with the transaction. Finally, there is no change in liabilities. Therefore, total assets, total liabilities, and total equity remain unchanged.

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