What is the effect on the statement of financial position when the business has cash sales of $15,000 of goods that were originally purchased for $10,000?
A)Increase asset bank $12,000; increase equity $12,000.
B)Increase asset bank $15,000; decrease asset inventory $10,000; increase equity $5,000.
C)Increase asset bank $4,000; increase equity $4,000.
D)None of the above.

Question

Quizplus · Accepted Answer

Cash sales of $15,000 will increase the asset of cash in the statement of financial position by $15,000, and the previous inventory purchased for $10,000 will decrease the asset of inventory by $10,000. Therefore, the statement of financial position will show an increase in bank asset by $15,000 and a decrease in inventory asset by $10,000, leading to a net increase in assets of $5,000. This $5,000 increase in assets will increase equity by the same amount, as the business has not incurred any new liabilities or expenses to generate this cash sale. Thus, the statement of financial position will reflect an increase in asset and equity by $5,000.

What Is the Effect on the Statement of Financial Position