A business commenced with capital in cash of $1,000. Inventory costing $800 net of sales tax is purchased on credit. Half of this inventory is then sold for $1,000 plus sales tax, the customer paying in cash at once.

The accounting equation after these transactions would show:

A. assets $1,775 less liabilities $175 equals capital $1,600
B. assets $2,775 less liabilities $975 equals capital $1,200
C. assets $2,575 less liabilities $800 equals capital $1,775
D. assets $2,575 less liabilities $975 equals capital $1,600