Question

Suppose Cardullo's purchased four 24-unit cases of Nutella for a total of $500. The business bought the Nutella on credit, and they will not pay until 30 days later.

First, how will the accounting equation be affected at the time of the purchase? Select all that apply.

Answer 1

At the time of Cardullo's credit purchase of Nutella, Inventory increases by $500 and Accounts Payable also increases by $500, maintaining balance in the accounting equation.

Step-by-step explanation:

When Cardullo's purchased four 24-unit cases of Nutella for a total of $500 on credit, the accounting equation will be affected at the time of the purchase in the following way:Inventory increases by $500 because the purchase adds to the company's goods available for sale.Accounts Payable also increases by $500, reflecting the company's obligation to pay this amount in the future.

Since the transaction is on credit, there's no immediate impact on Cash. The key components that are affected are Inventory and Accounts Payable, both of which increase by the same amount, keeping the accounting equation balanced.When Cardullo's purchased four 24-unit cases of Nutella for $500 on credit, the accounting equation would be affected in the following way:The assets would increase by the value of the Nutella purchased, which is $500.The liabilities would also increase by the same amount, as this is an amount owed on credit.The owner's equity would remain unchanged as the owner's investment or withdrawal is not involved in this transaction.