Question

and originally purchased for $30,000 is sold for $62,000 in cash. What is the effect of the sale on the accounting equation? a. assets increase by $62,000; liabilities decrease by $30,000; owner's equity increases by $32,000 b. assets increase by $32,000; owner's equity increases by $32,000 c. assets increase by $30,000; no change in liabilities; owner's equity increases by $62,000 d. assets increase by $62,000; owner's equity increases by $62,000

Answer 1

B: assets increase by $32,000; owner's equity increases by $32,000

Step-by-step explanation:

The good was in the inventory valued at $30,000. The movements in accounting are:

• Cash increases by 62,000 --> assets increase by 62,000
• Sales Increases by 62,000 --> owner's equity increases by 62,000
• Cost of sales increases by 30,000 --> owner's equity decreases by 30,000
• Inventory decreases by 30,000 --> assets decrease by 30,000
• Net results:

1. assets +62,000 - 30,000 = +32,000
2. owner's equity +62,000 - 30,000 = +32,000