Your firm has a beginning balance of $8,000 cash,$2,000 inventory,and $10,000 initial equity.Your 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 is your only transaction,your resulting balance sheet should most closely resemble which of the following choices?

Question

Quizplus · Accepted Answer

The sale of $1,000 of inventory for three times its amount ($3,000) means that the firm now has $11,000 cash ($8,000 beginning balance + $3,000 from the sale). The inventory balance will decrease to $1,000, and the initial equity will remain at $10,000. The retained earnings will be $2,000, as there were no expenses incurred in the sale of the inventory. Therefore, the resulting balance sheet should look like: 
Cash = $11,000 
Inventory = $1,000 
Initial Equity = $10,000 
Retained Earnings = $2,000

Your Firm Has a Beginning Balance of $8,000 Cash,$2,000 Inventory,and