Home Theater Advantage sells audio equipment.Home Theater Advantage acquired 50 speakers from a manufacturer at a cost of $200 per speaker and purchased the speakers on account.The effect of this transaction on Home Theater Advantage would be to

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When Home Theater Advantage acquires 50 speakers on account from a manufacturer for $200 per speaker, it increases its inventory by $10,000 (50 speakers x $200 per speaker). Since the speakers were purchased on account, it also increases the accounts payable by $10,000. There is no effect on capital or cash at this point in time. Therefore, the correct answer is D, which states that the transaction increases inventory by $10,000 and increases accounts payable by $10,000.

Home Theater Advantage Sells Audio Equipment