Asked by Hailey Cranor on May 18, 2024
Verified
Which of the following statements is false when a company sells inventory costing $700 for $1,200 cash and operating expenses are $200?
A) Cost of goods sold is $700.
B) Gross profit is $500.
C) Stockholders' equity increases by net income of $300.
D) Net sales increase $500.
Gross Profit
The difference between sales revenue and the cost of goods sold, before deducting overheads, salaries, and other operating expenses.
Stockholders' Equity
The residual interest in the assets of an entity that remains after deducting its liabilities.
- Discern and quantify aspects of the income statement and balance sheet.
- Comprehend the impact of particular transactions on financial statements and ratios.
Verified Answer
ZP
ZIARA PEEBLESMay 24, 2024
Final Answer :
D
Explanation :
Net sales will increase by the amount of revenue earned, which is $1,200. The cost of goods sold will be deducted from revenue to arrive at gross profit, which is $500 ($1,200 - $700). Operating expenses will be deducted from gross profit to arrive at net income, which is $300 ($500 - $200). Therefore, statement D is false as net sales do not increase by the amount of gross profit earned.
Learning Objectives
- Discern and quantify aspects of the income statement and balance sheet.
- Comprehend the impact of particular transactions on financial statements and ratios.
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