if nordstrom originally purchased the shoes from its shoe vendor for 70 564025

Nordstrom must also show the consumption of the asset sold—the shoes in inventory. If Nordstrom originally purchased the shoes from its shoe vendor for $70, Nordstrom would record the following journal entry to recognize as an expense the product costs associated with the sale of the shoes:

To record the reduction of inventory associated with the sale of merchandise.

This transaction affects Nordstrom’s income statement; it also affects Nordstrom’s balance sheet when revenue and expense accounts are closed to the Retained Earnings account. The revenue part of the transaction increases Retained Earnings by $100, and the expense part of the transaction decreases Retained Earnings by $70. The net effect increases Retained Earnings by $30 (before taxes).