The Surfboard Centre paid $5,000 cash for inventory. These boards are on display in their showroom. This transaction will:

Question

BlackTom AI · Accepted Answer

Purchasing inventory for cash exchanges one asset (cash) for another asset (inventory), so total assets remain unchanged and shareholders’ equity is unaffected.

1. Relevant knowledge points and concepts
- Accounting equation: Assets = Liabilities + Shareholders’ Equity. Any transaction must keep this equation balanced.
- Asset exchange: When one asset is increased and another decreased by the same amount, total assets do not change.
- Journal entry treatment: Buying inventory for cash is recorded as an increase (debit) to Inventory and a decrease (credit) to Cash.
- Recognition: Inventory on display in the showroom is still inventory (a current asset), not an expense. Expenses (which reduce equity) are recognized when goods are consumed/sold or costs are incurred.

2. Step-by-step reasoning
- Record the journal entry: Debit Inventory $5,000; Credit Cash $5,000.
- Effect on individual accounts: Inventory increases by $5,000; Cash decreases by $5,000.
- Compute asset change: +$5,000 (inventory) + (−$5,000) (cash) = $0 net change in total assets.
- Liabilities are unchanged (no borrowing).
- No revenue or expense is recorded, so retained earnings and shareholders’ equity are unchanged.

3. Intermediate calculation steps
- Change in Cash = −$5,000
- Change in Inventory = +$5,000
- Net change in Assets = −$5,000 + $5,000 = $0
- Change in Liabilities = $0 → therefore Change in Equity = $0

4. Why the correct answer is correct
Because the transaction is purely an exchange of asset types with equal amounts, the total amount of assets is unchanged. Since there are no revenue, expense, or liability effects, shareholders’ equity is also unchanged.

5. Why other possible answers would be incorrect
- Saying assets increase or decrease is wrong because one asset increased while another decreased by the same amount.
- Saying liabilities change is incorrect because no borrowing or payable was created.
- Saying shareholders’ equity changes is incorrect because no income or expense items affecting retained earnings were recorded.

6. Conclusion
The correct outcome is that the transaction will have no effect on total assets or shareholders’ equity, matching the provided answer.

The Surfboard Centre paid $5,000 cash for inventory. These boards are on display in their showroom. This transaction will:单项选择题

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The Surfboard Centre paid $5,000 cash for inventory. These boards are on display in their showroom. This transaction will:单项选择题

类似问题

A Neverland company pays a Wonderland ¥3 million for the local franchise rights. This will result in a ______ to Wonderland’s ______.

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更多留学生实用工具

希望你的学习变得更简单

A Neverland company pays a Wonderland ¥3 million for the local franchise rights. This will result in a to Wonderland’s .

The ¥2,000 train ride in Wonderland taken by a lady from Neverland, which was paid for via a credit card, would result in a to Neverland’s to reflect the trade of a service.