Your new firm is operating in an all-cash environment without taxes. Y

Your new firm is operating in an all-cash environment without taxes. You sold $1,000 of inventory for three times the amount you paid for it.

If this was the only transaction, which of the following would most closely match the entries on your income statement?
A) Revenues = $1,000, expenses = $1,000, profit = $0
B) Cash increases by $3,000, inventory decreases by $1,000, and retained earnings increases by $2,000.
C) Revenues = $3,000, expenses = $0, profit = $3,000
D) Revenues = $3,000, expenses = $1,000, profit = $2,000

ANSWER

D