Your new firm is operating in an all-cash environment without taxes.You sold $1,000 of inventory for three times the amount you paid for it.If this was the only transaction,which of the following would most closely match the entries on your income statement?
A)Revenues = $1,000,expenses = $1,000,profit = $0
B)Cash increases by $3,000,inventory decreases by $1,000,and retained earnings increases by $2,000.
C)Revenues = $3,000,expenses = $0,profit = $3,000
D)Revenues = $3,000,expenses = $1,000,profit = $2,000

Question

Quizplus · Accepted Answer

The correct answer is D because if you sold $1,000 of inventory for three times the amount you paid for it, your revenues would be $3,000 (the selling price), your expenses would be $1,000 (the cost of the inventory sold), resulting in a profit of $2,000 (revenues minus expenses).

Your New Firm Is Operating in an All-Cash Environment Without