Final answer:
The Wilson Company's financial statements after a $2,000 cash sale with 6% sales tax would show an increase in cash and assets by $2,120, an increase in liabilities by $120 for sales tax payable, and an increase in equity by $2,000 in retained earnings.
Step-by-step explanation:
The Wilson Company's financial statements will reflect the cash sale of $2,000 and the associated sales tax. With a sales tax of 6%, the total amount collected is $2,000 * 1.06 = $2,120. Accordingly, cash and sales (revenue) both increase by $2,000, while sales tax payable (a liability) increases by $120. The correct journal entry would involve a debit to cash for $2,120, a credit to sales revenue for $2,000, and a credit to sales tax payable for $120.
This translates to the following effect on the financial statements:
- Cashflow: An increase in cash by $2,120
- Assets: An increase in cash by $2,120
- Liabilities: An increase in sales tax payable by $120
- Equity: An increase in retained earnings by $2,000 (assuming no expenses related to the sales)
The accounting equation would be:
Assets = Liabilities + Equity (Revenue - Expenses)
$2,120 = $120 + ($2,000 - $0)
Option C is incorrect because it does not account for the sales tax payable. The correct choice that reflects the financial statements after the transaction would be option D.