Which of the Following Is TRUE When Goods Are Sold

question 10

Multiple Choice

Which of the following is TRUE when goods are sold on on an installment basis?

• A)Revenue is recognized at time of the initial sale.
• B)Cost of goods sold is debited for the cost of the merchandise sold.
• C)Revenue is not recognized until all monies due under the contract have been collected.
• D)The deferred gross profit liability is debited as cash is collected.

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Definitions:

Cost of Goods Sold

The total cost directly associated with producing goods, including materials and labor expenses, that a company sells during a specific period.

Collections

The process of recovering amounts owed to a business by its debtors or customers.

Net Income

Net income is the total profit of a company after all expenses, taxes, and costs have been deducted from total revenue.

Cost of Goods Sold

The immediate expenses associated with manufacturing the products a company sells, encompassing both materials and labor costs.