Dolan Co Received Merchandise on Consignment

question 121

Multiple Choice

Dolan Co. received merchandise on consignment. As of March 31, Dolan had recorded the transaction as a purchase and included the goods in inventory. The effect of this on its financial statements for March 31 would be

• A) no effect.
• B) net income was correct and current assets and current liabilities were overstated.
• C) net income, current assets, and current liabilities were overstated.
• D) net income and current liabilities were overstated.

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Definitions:

Sales Commissions

The payment given to sales employees based on the amount of sales they generate, typically a percentage of the sale price.

Sales Volume

The amount of goods or services a company sells over a certain time frame.

Variable Costs

Costs that vary directly with the level of output or production, such as materials and labor directly involved in manufacturing.

Step-Variable Cost

Costs that remain constant for a set level of activity but jump to a higher amount once certain thresholds are exceeded.