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17 September, 07:17

How would a purchase $400 of inventory on credit affect the income statement? A. It would increase liabilities by $400. B. It would decrease liabilities by $400. C. It would increase noncash assets by $400. D. Both A and C E. None of the above

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  1. 17 September, 08:14
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    A. It would increase liabilities by $400.

    Explanation:

    Merchandise inventory Debit = $400

    Accounts payable Credit = $400

    Note: We assume that the company used a perpetual inventory system. To record the purchase of inventory on account. As inventory is a debit, it increases the asset site. The normal balance of accounts payable is credit; the liabilities site is increased.

    Therefore, option A is correct.
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Home » Business » How would a purchase $400 of inventory on credit affect the income statement? A. It would increase liabilities by $400. B. It would decrease liabilities by $400. C. It would increase noncash assets by $400. D. Both A and C E. None of the above
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