Exeter Company sold merchandise for $10,000 cash. The merchandise had cost the company $4,500. What is the effect of the sale on the balance sheet?

Question

Quizplus · Accepted Answer

- Cash increases by $10,000 as a result of the sale.
- Inventory decreases by $4,500 because the merchandise is sold.
- Retained earnings increase by $5,500 because the company earned a profit of $5,500 ($10,000 - $4,500) from the sale.

Exeter Company Sold Merchandise for $10,000 Cash