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Carl Cornfield made up the following balance sheet after one year in business.

\begin{tabular}{|l|l|l|l|}
\hline \multicolumn{2}{|c|}{Assets} & \multicolumn{2}{c|}{Liabilities and Owner's Equity} \\
\hline Cash & [tex]$\$[/tex] 5,000[tex]$ & Accounts Payable & $[/tex]\[tex]$ 3,500$[/tex] \\
\hline Equipment & [tex]$\$[/tex] 5,000[tex]$ & Owner's Equity: Investment & $[/tex]\[tex]$ 6,500$[/tex] \\
\hline Total & [tex]$\$[/tex] 10,000[tex]$ & Total & $[/tex]\[tex]$ 10,000$[/tex] \\
\hline
\end{tabular}

Carl receives [tex]$\$[/tex] 1,750$ for vegetables. Which two lines of the balance sheet will this increase?

A. Equipment
B. Cash
C. Owner's Equity
D. Accounts Payable



Answer :

GinnyAnswer
To solve this problem, let's analyze the financial transaction described and its effects on Carl Cornfield's balance sheet.

1. Carl receives [tex]$1,750 for vegetables. This transaction increases the cash balance since this is a cash inflow. 2. The receipt for vegetables also affects Owner's Equity, specifically through an increase in revenue. Revenue increases Owner's Equity. Given this, let's determine the changes step-by-step. ### Step-by-Step Solution: 1. Identify the initial cash balance and owner's equity: - Initial cash balance: $[/tex]5,000
- Initial owner's equity (investment): [tex]$6,500 2. Determine the increase in cash and owner's equity: - Cash increase: $[/tex]1,750
- Owner's equity increase due to revenue: [tex]$1,750 3. Calculate the new balances: - New Cash Balance = Initial Cash Balance + Cash Increase - New Cash Balance = $[/tex]5,000 + [tex]$1,750 = $[/tex]6,750
- New Owner's Equity = Initial Owner's Equity + Equity Increase
- New Owner's Equity = [tex]$6,500 + $[/tex]1,750 = [tex]$8,250 ### Updated Balance Sheet Lines: - Cash increases from $[/tex]5,000 to [tex]$6,750. - Owner's Equity increases from $[/tex]6,500 to $8,250.

### Conclusion:
The two lines of the balance sheet that increase are:
1. Cash
2. Owner's Equity

Thus, the correct answers are:
- Cash
- Owner's Equity

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