Computers for You Is a Retailer Specializing in Selling Computers

question 1

Multiple Choice

Computers For You is a retailer specializing in selling computers and related equipment. During 2019, Computers For You sells €200,000 of merchandise to Sandcastles, Inc. Computers For You incurs €24,000 of freight costs associated with these sales. Which of the following is true regarding how this €24,000 is treated on the financial statements?

• A) Computers For You will report the €24,000 as part of merchandise inventory on the statement of financial position.
• B) Sandcastles, Inc. will report the €24,000 as part of merchandise inventory on the statement of financial position.
• C) Computers For You will report the €24,000 as part of operating expenses on the income statement.
• D) Sandcastles, Inc. will report the €24,000 as an accounts receivable on the statement of financial position.

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Definitions:

Regulatory Capture Effect

A situation where regulatory agencies are dominated by the industries or interests they are charged with regulating, leading to favorable policies for the regulated entities.

Principal-Agent Problem

A situation in which there is a conflict of interest between a principal (such as an owner) and an agent (such as a manager), because the agent may not act in the best interest of the principal.

Negative Externalities

Costs suffered by a third party as a result of an economic transaction they were not involved in, such as pollution.

Unethical And Illegal Behavior

Actions that are morally wrong and prohibited by law, ranging from fraud and corruption to violations of human rights.