Folger Company uses the perpetual inventory method. Folger sold goods that cost $4,600 for $7,200. If the sale was made on account, the sale will:

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The sale will increase assets (accounts receivable) and equity (sales revenue) by $7,200 and it will decrease assets (inventory) and equity (increase cost of goods sold) by $4,600. The net effect is an increase to total assets and total equity of $2,600.

Folger Company Uses the Perpetual Inventory Method