Computers for You Is a Retailer Specializing in Selling Computers

question 34

Multiple Choice

Computers For You is a retailer specializing in selling computers and related equipment.During 2015, 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:

Account Receivable

Money owed to a company by customers who have purchased goods or services on credit.

Classified Revenue

Classified revenue involves organizing a company's revenue into distinct categories for detailed financial analysis and reporting.

Accounting Equation

The fundamental principle of accounting that states assets equal liabilities plus owner's equity.

Purchasing Supplies

The process of acquiring the goods and materials a company needs to operate.