Question

Determine the effect on the balance sheet after the following transaction.

You sell a product purchased for $750 for $1,500.00. This means:

Cash increases by $750

Cash decreases by $750

Owner’s equity increases by $750

Owner’s equity decreases by $750

Answer 1

The transaction of this is
Cash. Increase by 750

Answer 2

C. Owners equity increases by $750

Explanation:

We are given that,

The product is sold for $1500 which was purchased for $750.

Since, 'Owner's equity is the difference of the assets and liabilities'.

As, the cost of the product (asset) = $750 and the selling price of the product (liabilities) = $1500

So, the difference of the price = 1500 - 750 = $750

Now, the difference being positive implies that the equity increases by $750.

Thus, the correct option is given by,

C. Owners equity increases by $750