Question
TB MC Qu. 04-38 What type of account is the... Nhat type of account is the...
TB MC Qu. 04-38 What type of account is the... Nhat type of account is the Cost of Goods Sold account? Multiple Choice Contra asset Asset Liability Expense
"BMC Qu. 04-51 Anchor Company sold merchandise with a cost... Anchor Company sold merchandise with a cost of $560 to a customer for $890 on account. Due to an error, this sale was never recorded in the accounting records. What effect will the failure to make the necessary entries have on the company's financial statements? O Total assets and total stockholders' equity will be understated C) Total assets will be overstated and total stockholders' equity will be understated O The financial statements will not be affected Total assets and total stockholders' equity will be overstated
Answers
Answer -
Q.1 Answer -
Expense
The cost of goods sold is the largest expense that a business incurs. The cost of goods sold is the aggregate amount of expenses incurred to create products or services that have been sold. The cost of goods sold appears in the income statement.
Q.2 Answer -
The total assets and total stockholders equity will be understated
The journal entries :
Accounts receivable $890 Sales $890 (Being the credit sales is made)
Cost of goods sold $560 Inventory $560 (Being the inventory is sold at cost recorded) Gross profit = $890 - $560 = $330
The $330 (gross profit) reflect the understatement of total assets (Accounts receivable - Inventory) and the understatement of total profit or equity (Sales - Cost of goods sold).
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