What is the effect on the balance sheet when the business has cash sales of $12,000 of goods that were originally purchased for $8,000?
A) increase the asset Bank by $12,000; increase equity by $12,000
B) increase the asset Bank by $4,000; increase equity by $4,000
C) increase the asset Bank by $12,000, decrease the asset Inventory by $8,000; increase equity by $4,000
D) none of the above

Question

Quizplus · Accepted Answer

When the business has cash sales of $12,000 of goods that were originally purchased for $8,000, the balance sheet is affected as follows:
- The asset Bank increases by $12,000, as cash is received from the sale.
- The asset Inventory decreases by $8,000, as the goods sold are no longer in inventory.
- The net effect on equity is an increase of $4,000 ($12,000 cash received - $8,000 cost of goods sold). Therefore, equity will increase by $4,000. Hence, option C is the correct answer.

What Is the Effect on the Balance Sheet When the Business