**Educational Website Content: Accounting Transactions**The following entry is taken from the journal of a merchandising company:| Account Title | Debit | Credit ||-----------------------------|-------|--------|| Cost of Goods Sold | 6,000 | || Merchandise Inventory | | 6,000 |**Explanation:**In this transaction, the company records the cost of goods sold as an expense, which results in a debit of $6,000 to the “Cost of Goods Sold” account. Simultaneously, the “Merchandise Inventory” account is credited by the same amount, $6,000, indicating a decrease in inventory.The effect of this entry on the company's financial statements is that it reflects the reduction of inventory and an increase in expenses due to sales. This journal entry ultimately affects the income statement by increasing the cost of goods sold, thus reducing net income, and affects the balance sheet by reducing inventory assets.**Question:**What is the effect of this entry on the company's financial statements?**Multiple Choice Options:**- ○ Assets and stockholders' equity increase.- ○ Assets and stockholders' equity decrease.- ○ Assets and liabilities increase.- ○ Assets decrease and stockholders' equity increases.The correct answer is: **Assets decrease and stockholders' equity decreases.** The reduction in inventory reduces the asset balance, and the increase in expenses reduces net income, thus decreasing stockholders' equity.

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Description: **Educational Website Content: Accounting Transactions**The following entry is taken from the journal of a merchandising company:| Account Title | Debit | Credit ||-----------------------------|-------|--------|| Cost of Goods Sold

Answer : Cost of good sold is a expenses and when it increase shareholders' equity will be decrease.…

Business

Accounting

The following entry is taken from the journal of a merchandising company: Debit Credit Account Title Cost of Goods Sold 6,000 Merchandise Inventory 6,000 What is the effect of this entry on the company's financial statements? Multiple Choice

The following entry is taken from the journal of a merchandising company: Debit Credit Account Title Cost of Goods Sold 6,000 Merchandise Inventory 6,000 What is the effect of this entry on the company's financial statements? Multiple Choice

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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