Sales Returns Which of the following statements is true relating to the allowance for sales returns? Oa. Sales returns is treated as an expense in the income statement and, therefore, reduces profit for the period. Ob. An excess of the amount by which the allowance for sales returns is increased compared with the actual returns for the period indicates the company may have inflated profit for the period. Oc. The amount by which the allowance for sales returns is reduced during the period is recognized as a reduction of sales for the period, thus reducing profts. Od. Increasing the allowance for sales returns by an amount that is less than the actual returns recognized for the period may indicate either the company is attempting to increase profit for the period or its estimates that less of its products will be returned in the future.

Sales Returns Which of the following statements is true relating to the allowance for sales returns? Oa. Sales returns is treated as an expense in the income statement and, therefore, reduces profit for the period. Ob. An excess of the amount by which the allowance for sales returns is increased compared with the actual returns for the period indicates the company may have inflated profit for the period. Oc. The amount by which the allowance for sales returns is reduced during the period is recognized as a reduction of sales for the period, thus reducing profts. Od. Increasing the allowance for sales returns by an amount that is less than the actual returns recognized for the period may indicate either the company is attempting to increase profit for the period or its estimates that less of its products will be returned in the future.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Which one of the following is an advantage of LIFO? a. In periods of rising prices, less income taxes are paid b. In periods of rising prices, more holding gains are reported in net income c. Record keeping and financial statement preparation are easier d. Conservative income statement and balance sheet disclousures result from falling prices
Problem Attached
Sales revenue Purchases Net income as a percent of sales revenue Beginning inventory Expenses including income taxes Tax rate a. Required a. Prepare the company's single-step income statement. b. Prepare the journal entry at period-end to eliminate beginning inventory and to record ending inventory. Note: Do not use negative signs with your answers. Income Statement Sales revenue Cost of goods sold: Beginning inventory Plus: Purchases Cost of goods available for sale Less: Ending inventory Cost of goods sold Gross margin Expenses Income before taxes Income taxes Net income $ $ $440,000 $308,000 $ 15% $55,000 $99,000 25% 440,000 55,000 308,000 X 0 x 0 x 0 x x 0 x 0 x 0 x
A weakness of the percent-of-sales method to preparing a pro forma income statement is
23. In the absence of other revenue and gains and other expenses and losses, a merchandising company's net income is determined by subtracting operating expenses and income tax expense from gross profit. A. True B. False
10. Choose the options to correctly complete the following statement. Some balance sheet and income statement accounts that vary directly with sales include: 1. Cost of goods sold II. Depreciation III. Accounts payable IV. Accounts receivable O I, II, III only O I, II, IV only O I, III, IV only O I, II, III, and IV
Which one of the following statements is true? a. Income manipulation is difficult under LIFO.b. Accounting principles do not require that the inventory cost flow approximate the physical flow of goods.c. Companies may use LIFO for tax purposes and FIFO in the financial statements.d. In periods of declining prices, LIFO will result in the payment of less income taxes.