In its first year of business, Company A purchases 100 bags of cement (cement is the company's inventory that it sells to construction companies). The company paid $500 to have the bags delivered and $75 for insurance while in transit. In addition to the reduction in cash, how does the $500 delivery cost and $75 insurance in transit immediately affect the company's financial statements?

Decreases Inventory on the Balance Sheet

Increases Delivery and Insurance expenses on the Income Statement

Increases Inventory on the Balance Sheet

None of the above are correct