Faust Company uses the perpetual inventory system. Faust sold goods that cost $2,300 for $3,600. The sale was made on account. What is the net effect of the sale on the company's financial statements? (Consider the effects of both parts of this event.)

increase total assets by $1,300.

Explanation:

The net effect is shown below

The first entry is

Cost of goods sold Dr $2,300

To Merchandise Inventory $2,300

(Being the cost of inventory is recorded)

Now the second entry is

Account receivable Dr 3,600

To Sales revenue 3,600

(Being the sales is recorded)

Now the net effect is

= 3,600 - 2,300

= 1,300

This 1,300 reflect the increase in the total assets