(a)
Introduction: Cost of goods sold is the amount paid by the company to make the sale happen. It includes only direct costs like raw materials and direct labor. Indirect costs like selling and administrative expenses are not included in it.
Effect on the cost of goods sold
(b)
Introduction: Net income is the amount earned by the company after paying all its expenses which includes both direct and indirect expenses. It is useful for various users in knowing the profitability of the company.
Effect on net income.
(c)
Introduction: Value of COGS depends on the accounting standard followed. Since COGS reflects the cost therefore higher COGS means higher cost. In case of understatement of ending inventory, the cost of goods sold of the year is overstated while the net income of subsequent year is understated.
Effect on the cost of goods sold.
(d)
Introduction: Net income is calculated after considering expenses and taxes. It is used to determine earnings per share. It is also known as residual income as it is left after paying all expenses. In the case of the understatement of ending inventory, the net income of the year is understated while the net income of the subsequent year is overstated.
Effect on net income.
Want to see the full answer?
Check out a sample textbook solution
Chapter 5 Solutions
FINANCIAL+MANAG.ACCT - CONNECT ACCESS
- help me to solve this accounting questionarrow_forwardXYZ Manufacturing has provided the following production and total cost data for two levels of monthly production volume. The company produces a single product. . . • Production Volume: 1,500 units → 3,000 units - Direct Materials Cost: $60,000 → $120,000 Direct Labor Cost: $50,000 $100,000 → Manufacturing Overhead Cost: $72,000 → $88,500 What is the best estimate of the total monthly fixed manufacturing cost?arrow_forwardWhat was the amount of swift corporations bad bebt expense?arrow_forward
- Accurate Answerarrow_forwardSummit Consulting Group (SCG) has 85 employees, 42 of whom are assigned to Department X and 43 to Department Y. SCG incurred $529,550 of health insurance costs during 2025. Required: Determine the amount of the health insurance costs to be allocated to Department X and to Department Y.arrow_forwardI want to correct answer general accounting questionarrow_forward
- What is the salaries and commisions ??arrow_forwardThe variable overhead rate variancearrow_forwardTimberline Apparel, Inc. reported a debt-to-equity ratio of 2.8 times at the end of 2022. If the firm's total assets at year-end were $18.9 million, how much of their assets are financed with equity?arrow_forward
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage Learning