Computers for You Is a Retailer Specializing in Selling Computers

question 91

Multiple Choice

Computers For You is a retailer specializing in selling computers and related equipment.During 2011, 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:

Investor

A person or organization that invests money expecting to earn financial profits.

Bond

A security reflecting a relatively long-term debt relationship between the issuer (borrower) and the buyer (lender).

Financial Market

A marketplace where buyers and sellers engage in the trade of assets such as stocks, bonds, currencies, and derivatives.

Securities

Financial instruments representing an ownership position, a creditor relationship, or rights to ownership, such as stocks, bonds, and options.