The Fastbank Motorcycle Service Company (FMSC) wins a $10 million bid to provide

Question

The Fastbank Motorcycle Service Company (FMSC) wins a $10 million bid to provide the repair service for a recall on a popular brand of motorcycles. No money is exchanged. The repairs are expected to take place next quarter. How will these events affect the balance sheet?

The Expense Recognition (Matching) principle indicates

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. Both Accounts Receivable and Stockholders' Equity will increase by $10 million this quarter. These events will not impact the balance sheet this quarter.

Explanation / Answer

These events will not impact the balance sheet this quarter.

where expenses should be presented on the income statement

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