What is the effect on the statement of financial position when the business has cash sales of $12,000 of goods that were originally purchased for $8,000?
A) Increase asset bank $12,000; increase equity $12,000.
B) Increase asset bank $12,000; decrease asset inventory $8,000; increase equity $4,000.
C) Increase asset bank $4,000; increase equity $4,000.
D) None of the above.

Question

Quizplus · Accepted Answer

When the business makes cash sales of $12,000 of goods that were originally purchased for $8,000, the effect on the statement of financial position would be an increase in the asset bank by $12,000, a decrease in the asset inventory by $8,000, and an increase in equity by $4,000. Therefore, choice B is the best option. Choice A is incorrect because it does not reflect the decrease in inventory. Choice C is incorrect because it does not reflect the original cost of goods sold, which is $8,000. Choice D is incorrect because there is an effect on the statement of financial position.

What Is the Effect on the Statement of Financial Position