On March 31, 2015, Cars, Inc. owes Preston Devices, one of its suppliers, $25,000 for previous purchases. During April 2015, Preston sells Cars devices with a sales price of $10,000 and a cost to Preston of $8,000. During April, Cars pays Preston $12,000 against the amount owed to Preston. What is the effect of these April transactions on Preston's balance sheet?

March 31, outstanding debt $25,000

During April $10,000 more merchandise is sold to Cars inc. (COGS $8,000)

Cars paid $12,000 to Preston to lower its accounts payable

On March 31, Preston's balance sheet showed an accounts receivable of $25,000.

On April 30, the accounts receivable balance is $23,000, the cash balance increased by $12,000 and retained earnings should increase by $2,000.

The income statement should show an increases in sales revenue of $10,000 - $8,000 COGS = $2,000 profit (which increases retained earnings).

cognitive overload: having a lot on your mind impairs decision-making and tends to result in the simplest, but not necessarily best, option being selected.

empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.

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