Identify the Effect(s) as a Result of Each Transaction Listed

question 35

Essay

Identify the effect(s) as a result of each transaction listed as 1 through 4 below by placing the letter of the effect on total liabilities and the effect on net income in the two columns provided. Keep in mind that there are currently no accrued expenses recorded on the balance sheet as liabilities.

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Definitions:

Intra-Entity Transactions

Transactions occurring between divisions or departments within the same company.

Intra-Entity Gross Profit

The profit realized from transactions within segments of the same company, not reflected in consolidated financial statements until realized externally.

Deferred

Accounting term used to describe revenues or expenses that have been incurred but not yet recorded in accordance with accrual accounting principles.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold in a company, including materials and labor costs.