What is the overall effect on the statement of financial position when the business sells inventory for a profit of $5,000?
A)Increase total assets $3,000; decrease total equity $3,000.
B)Increase total assets $5,000; increase total equity $5,000.
C)No change in total assets; no change in total equity.
D)None of the above.

Question

Quizplus · Accepted Answer

Selling inventory for a profit of $5,000 will increase the business's total assets by $5,000 (due to the cash received from the sale) and increase its total equity by $5,000 (due to the profit from the sale being added to retained earnings). Therefore, there is an increase in both assets and equity.

What Is the Overall Effect on the Statement of Financial