When Sales Discounts in the Current Year Exceed Sales Discounts

question 41

Multiple Choice

When sales discounts in the current year exceed sales discounts in the prior year,assuming all else remains unchanged,what is the effect on the gross profit percentage?

• A)The percentage will not change or it will increase.
• B)The percentage will not change or it will decrease.
• C)The percentage will decrease.
• D)None of the answers are acceptable.

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Definitions:

Financing Charge

An additional fee charged by a lender to a borrower for the use of borrowed funds, often expressed as an annual percentage rate.

Compensating Balance

A minimum account balance that a company agrees to maintain in a bank account to offset the cost of banking services provided.

Effective Rate

The actual interest rate earned or paid on an investment, loan, or other financial product, taking into account the compounding effect.

Implied Annual Cost

An estimation of the cost associated with an investment or loan, calculated on a yearly basis, including interest, fees, and other charges.