When a merchandising company pays cash to purchase inventory

When a merchandising company pays cash to purchase inventory

a.the amount of total assets increases. b. the amount of expenses increases. c. the amount of total assets decreases. d. None of the answers is correct.

Solution

When a merchandising company pays cash to purchase inventory it means

i) Paying cash means cash (assets) decrease

ii) Purchase inventory means inventory (assets) increase

so it means its transaction has no effect on total assets.

so answer is d) None of the answers is correct.