If a Company Employs the Gross Method of Recording Accounts

question 135

Multiple Choice

If a company employs the gross method of recording accounts receivable from customers, then sales discounts taken should be reported as

• A) a deduction from sales in the income statement.
• B) an item of "other expense" in the income statement.
• C) a deduction from accounts receivable in determining the net realizable value of accounts receivable.
• D) sales discounts forfeited in the cost of goods sold section of the income statement.

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Definitions:

Inferior Good

A type of good for which demand decreases as the income of consumers increases, opposite to normal goods.

Income

Money received on a regular basis from work, property, business, or investments.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price within a specified period.

Alcohol

A chemical compound that is a widely used depressant in beverages; can be intoxicating if consumed in sufficient quantities.