Assuming the perpetual inventory system is used,which of the following statements about the multistep income statement is correct?
A)Sales discounts affect the calculation of Gross Profit.
B)Contra-accounts affect the Cost of Goods Sold.
C)Contra-revenue accounts increase Other Expenses.
D)Sales discounts are a Selling,General,and Administrative Expense.

Question

Quizplus · Accepted Answer

Net sales = Sales revenue − Sales discounts − Sales returns & allowances
Gross profit = Net sales − Cost of goods sold
As shown above,sales discounts affect the calculation of cost of goods sold and both contra-revenue accounts are included in the calculation of net sales.When a perpetual inventory system is used,Cost of Goods Sold is an account (rather than an amount that is calculated).

Assuming the Perpetual Inventory System Is Used,which of the Following