Which of the Following "Formulas" Is Incorrect

question 62

Multiple Choice

Which of the following "formulas" is incorrect?

• A)Gross profit - operating expenses = profit before income tax.
• B)Net sales - cost of goods sold = gross profit.
• C)Net sales - gross profit = cost of goods sold.
• D)Operating expenses - cost of goods sold = gross profit.

Determine the initial and subsequent measurement of investments using the equity method.

Account for the effect of investee's net income and dividends on investor's financial statements.

Calculate and account for the equity in investee income.

Determine the impact of intra-entity transactions on the investment account.

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Definitions:

Statement of Affairs

A statement of affairs is a financial report summarizing the assets and liabilities of a company, particularly in the context of a bankruptcy or insolvency situation.

Preliminary Report

An initial set of financial statements or findings, often not final or audited, released to provide an early indication of performance.

ASIC

The Australian Securities and Investments Commission, which acts as the financial services and markets regulator in Australia.

Insolvency

The state of being unable to pay debts owed when they are due, leading to potential bankruptcy.