Question

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Nelson Company experienced the following transactions during 2016, its first year in operation.
1. Issued $10,000 of common stock to stockholders.
2. Provided $6,300 of services on account.
3. Paid $2,600 cash for operating expenses.
4. Collected $3,900 of cash from accounts receivable.
5. Paid a $300 cash dividend to stockholders.
The total amount of assets shown on Nelson Company's December 31, 2016 balance sheet is:
-$11,000.
-$13,400.
-$13,700.
-$11,600.

Answer 1

To calculate Nelson Company's total assets as of December 31, 2016, one must add transactions that affect assets. The total assets are calculated by adding the services provided on account ($6,300) and subtracting cash paid for operating expenses ($2,600) and dividends ($300), resulting in $3,400 in assets. Thus, with the initial $10,000 from common stock issuance, the total assets amount to $13,400.

Step-by-step explanation:

To determine the total amount of assets on Nelson Company's December 31, 2016 balance sheet, we need to sum up all the transactions affecting assets:Issued $10,000 of common stock: This increases equity, not assets.Provided $6,300 of services on account: This creates $6,300 in accounts receivable, which is an asset.Paid $2,600 cash for operating expenses: This decreases cash, which is an asset, by $2,600.Collected $3,900 of cash from accounts receivable:

This increases cash (an asset) by $3,900, and reduces accounts receivable by the same amount—net effect on assets is zero.Paid a $300 cash dividend to stockholders: This reduces cash by $300, which decreases assets.Calculating the impact of these transactions on Nelson Company's assets:Starting assets = $0 (assuming no beginning balance)+$6,300 from services on account-$2,600 for operating expenses-$300 for dividends= $3,400 total assets.This means the correct answer is -$13,400.