Which of the following statements is false when a company sells inventory costing $700 for $1,200 cash and operating expenses are $200?
A)Cost of goods sold is $700.
B)Gross profit is $500.
C)Stockholders' equity increases by net income of $300.
D)Net sales increase $500.

Question

Quizplus · Accepted Answer

Net sales will increase by the amount of revenue earned, which is $1,200. The cost of goods sold will be deducted from revenue to arrive at gross profit, which is $500 ($1,200 - $700). Operating expenses will be deducted from gross profit to arrive at net income, which is $300 ($500 - $200). Therefore, statement D is false as net sales do not increase by the amount of gross profit earned.

Which of the Following Statements Is False When a Company