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Shankar Company uses a perpetual system to record inventory transactions. The company purchases inventory on account on. February 2 for $57,000 and then sells this inventory on account on March 17 for $78,700 Required: (o) Determine the financial statement effects for the purchase of inventory on account. (b) Determine the financial statement effects for the sale of inventory on account. Complete this question by entering your answers in the tabs below. Dotermine the financial statement effects for the sale of inventory on account. (Amounts to be deducted should be entered with minus sign.) Required a
Shankar Company uses a perpetual system to record inventory transactions. The company purchases inventory on account on. February 2 for $57,000 and then sells this inventory on account on March 17 for $78,700 Required: (o) Determine the financial statement effects for the purchase of inventory on account. (b) Determine the financial statement effects for the sale of inventory on account. Complete this question by entering your answers in the tabs below. Dotermine the financial statement effects for the sale of inventory on account. (Amounts to be deducted should be entered with minus sign.) Required a
Final answer:The purchase of inventory on account increases inventory and accounts payable by $57,000. The sale of inventory on account involves a decrease in inventory by the COGS, an increase in accounts receivable by $78,700, and the recognition of revenue for the same amount on the incomestatement, with the resulting gross profit being the difference between sales and COGS.Explanation:When Shankar Company purchases inventory on account, the financial statement effects include an increase in inventory and an increase in accountspayable. Specifically, there's an addition of $57,000 to both inventory (an asset on the balance sheet) and accounts payable (a liability on the balance sheet).Upon the sale of this inventory on account, there aremultiplefinancial statement effects. There's a decrease in inventory by the cost of goods sold (COGS), an increase in accounts receivable by $78,700 which reflects the sale on account, andrecognitionof revenue of $78,700 on the income statement. Additionally, the difference between the sale price and the COGS will be reflected as gross profit on the income statement.Learn more about Financial Statement Effects here:brainly.com/question/30464176#SPJ11...