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Yes Option A is the right answer.
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OPTION A==================
Answer is A. accounts receivable and revenue increased by $27,750 and inventory decreased by $26,250..
The correct option is A) accounts receivable and revenue is increased by $27,750 and inventory decreased by $26,250
The rational of the option is that Gloria Inc is shipping machines on60 days credit term ,so that accounts receivables or revenue is increasing by total invoice value $27,750(5 machines @ $5,550 per machines) and on the other side inventory is being decreased by $26,250.There isn't any involvement of cash or any cash in lay so that cash will remain unchanged
By selling of a product or invrntory the cost of goods sold or the cost of sales is increased instead of decreased because it is the cost of selling inventory if the sales increases then it cost will increase.The formula of cost of goods sold = Opening Inventory +Purchases(Cost of goods manufactured)-Ending Inventory . by selling ending inventory will decrease as a result cost of goods sold will increase.
A. Accounts Receivable and Revenue increases by $27,750/- and inventory decreases by $26,250/-, shipping cost will also be added to cost of goods sold.
Correct answer is option (A). Revenue and accounts receivable will increase by27750 $ and inventory will decrease by26250 $.
Note: While calculating the net income / net profit, cost of26250 $ will be included in Cost of Goods Sold.
Answer is A.5550*5=27750 AR & Sales Increases inventory is decreased by26,250
the Answer is A. the AR and Revenue increase by 27750.00 (5550*5) and inventory decreased by its cost that is26250.
