Suppose a company has only two Asset accounts: Cash and Inventory. During the month, the company purchased two units of inventory at a cost of $1,000 each and paid in cash. It subsequently sold one unit for $2,400 and received cash from the customer. What is the net change of Cash (assuming no other transactions)?
Correct answer. Cash decreased by $2,000 (2 x $1,000) when inventory was purchased, and increased by $2,400 when inventory was sold, with a net increase of $400.