Trout CoOrdered and Received Inventory Worth $45,000 on Credit

question 58

Multiple Choice

Trout Co.ordered and received inventory worth $45,000 on credit.What is the effect of this transaction on the accounting equation?

• A)Assets increases by $45,000 and liabilities increases by $45,000.
• B)Assets increases by $45,000 and liabilities decreases by $45,000.
• C)Assets decreases by $45,000 and liabilities increases by $45,000.
• D)Assets decreases by $45,000 and liabilities decreases by $45,000.

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Definitions:

Compounded Quarterly

The process by which interest is calculated and added to the principal sum of a loan or deposit four times a year.

Fifty-Fifty Sale

A promotional pricing strategy where items are offered for sale at a discount presumed to be 50% off their original price.

Conditional Sale Contracts

A conditional sale contract is a financing arrangement where the buyer gains possession and use of an asset, but title and ownership remain with the seller until the full purchase price is paid.

Compounded Quarterly

The process where interest is added to the principal sum of a deposit or loan every quarter, so that the added interest also earns interest from then on.