Which of the following statements does not accurately describe the effect of the sale of inventory at a profit on the financial statements?
A)Income from operations and current assets both increase.
B)Operating income and gross profit both increase.
C)Net income and earnings per share both increase.
D)Current assets do not change and stockholders' equity increases.

Question

Quizplus · Accepted Answer

The sale of inventory at a profit will increase income from operations and operating income, which in turn increases gross profit. It will also increase net income and earnings per share. However, current assets will technically decrease as inventory is being sold off, and stockholders' equity will increase due to the profit made from the sale. Therefore, the statement that does not accurately describe the effect of the sale of inventory at a profit on the financial statements is D, which incorrectly states that current assets do not change.

Which of the Following Statements Does Not Accurately Describe the Effect