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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.

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?

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.

The Expense Recognition (Matching) principle indicates

where expenses should be presented on the income statement.
how expenses should be split between the income statement and the balance sheet
the ordering of current assets and current liabilities on the balance sheet.
when costs are recognized as expenses on the income statement.

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