All of the Following Statements Regarding Sales Returns and Allowances

question 189

Multiple Choice

All of the following statements regarding sales returns and allowances are true except:

• A) Sales returns and allowances estimates are typically made as period-end adjustments.
• B) When sales returns and allowances adjustments are made to sales, an estimate must also be made for the cost side.
• C) The Inventory Returns Estimated account is a current liability account.
• D) New revenue recognition rules require sellers to report sales net of expected returns and allowances for annual periods.
• E) Sales Refund Payable is a current liability account.

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Definitions:

Increasing Costs

This refers to a situation where the costs of production increase as the output level increases, often seen in industries with limited resources.

Production Efficiencies

Occurs when a firm or economy can no longer produce additional amounts of a good without lowering the production level of another product.

Trade Surplus

A situation where a country's exports exceed its imports during a specific period, reflecting a positive balance of trade.