Financial Accounting Fundamentals | Online Course Support

Suppose a company has only two Asset accounts: Cash and Inventory. During the month, the company purchased three units of inventory at a cost of $1,000 each and paid in cash. It subsequently sold one unit for $1,400 and received cash from the customer. What is the net change of Cash (assuming no other transactions)?

 
 
 
 
 
 

Correct answer. Cash decreased by $3,000 (3 x $1,000) when inventory was purchased, and increased by $1,400 when inventory was sold, with a net decrease of $1,600.

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