QUESTION 17 Notyet answered Marked out of 4.00 P Flagquestion How would a sale o

Question

QUESTION 17 Notyet answered Marked out of 4.00 P Flagquestion How would a sale of $400 of inventory on credit affect the balance sheet if the cost of the inventory sold was $160? Select one: O A. It would increase noncash assets by $400 and increase equity by $400 B. It would decrease noncash assets by $160 and decrease equity by 160 C. It would increase cash by $400 and increase equity by $400 D. Both A and B, above happen simultaneously O 0 E. None of the above QUESTION 18 Notyet answered Marked ouE of 4.00 Flag questio et onerating nrofit after taX (NOPAT) includes operating revenues less expenses suc

Explanation / Answer

Journal entry for the sale of inventory on credit

Gross profit from the transaction = Sales - Cost of goods sold

= $400 - $160

= $240

As a result of the transaction Accounts receivable which is a non cash asset increases by $400 and equity increases by $240 as the transaction resulted in gross profit.

The answer is E.

Accounts receiavble $400 Sales $400

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