Credit sale increases net assets and capital by gross profit

Steps:

• Goods costing $140 sold for$200 on credit yields gross profit of $200 -$140 = $60.
• Record increase in trade receivables by $200 (asset ↑).
• Record decrease in inventory by $140 (asset ↓).
• Net change in assets = +$60; no liability change, so net assets ↑$60.
• Profit of $60 increases capital by$60.

Why none match:

• Actual effect is +$60 for both net assets and capital, per accounting equation (assets - liabilities = capital); options use incorrect$20/$80.

Why the others are wrong:

• A: No decrease; transaction is profitable.
• B: Impossible—net assets always equal capital, so changes must match in amount/direction.
• C: Opposite directions violate balance sheet equality.
• D: Wrong amount ($20 vs. actual$60).

Final answer: None; both increase by $60