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Inventory which originally cost 50.0 is sold for 70.0 in cash. Which answer best describes how this transaction would be reflected in the company's balance sheet

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anthougo

Question Completion with Options:

a. Inventory decreases 50.0, cash increases 70.0, retained earnings increases 20.0

b. Cash increases 20.0, sales increases 70.0, inventory decreases 50.0

c. Retained earnings decreases 50.0, inventory decreases 50.0, retained earnings increases 70.0, accounts receivable increases 70.0

d. Inventory decreases 50.0, sales increase 70.0, cash increases 70.0, accounts payable decreases 50.0

Answer:

In the company's balance sheet:

a. Inventory decreases 50.0, cash increases 70.0, retained earnings increases 20.0

Explanation:

a) Data and Analysis:

Cash $70 Sales Revenue $70

Cost of goods sold $50 Inventory $50

b) In the company's balance sheet, the net effect will be an increase in the cash balance by $70 and a decrease of the ending inventory by $50. These two accounts are balanced by an increase in Retained Earnings, which are adjusted from the income statement, in the sum of $20 ($70 - $50).

rahulsharma789888

The transactions which would be reflected in the balance sheet of the company are: Inventory decreases 50.0, cash increases 70.0, and retained earnings increases 20.0.

What is a balance sheet?

A balance sheet is a financial statement that lists the assets and liabilities of a corporation at a certain point in time.

It is one of the three primary financial statements—the other two being the income statement and cash flow statement—that are used to assess a company's performance.

Information and analysis

  1. Cash $70 $70 in sales revenue
  2. $50 was spent on the goods. $50 in inventory
  3. The net impact on the company's balance sheet will be an increase in cash by $70 and a reduction in ending inventory by $50.
  4. Retained Earnings are raised by $20 ($70 - $50), which is modified from the income statement in order to balance these two accounts.

Thus, above is the amount that is to be reflected in the company balance sheet.

Learn more about  balance sheet :

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