Smith Lots,Inc

Multiple Choice

Smith Lots,Inc.,operates in a state where there is a 6% sales tax.If a customer pays cash for merchandise with a sales price of $500,what effect will this transaction have on Smith Lots' balance sheet? (Ignore the effect on cost of goods sold.)

A) Assets increase by $530,current liabilities increase by $30,and stockholders' equity increases by $500.
B) Assets increase by $500,and stockholders' equity increases by $500.
C) Assets increase by $500,long-term liabilities increase by $30,and stockholders' equity increases by $500.
D) Assets increase by $500,current liabilities increase by $30,and stockholders' equity increases by $470.
E) Assets increase by $530,long-term liabilities increase by $30,and stockholders' equity increases by $500.