With a perpetual inventory system, assets and stockholders' equity increase by the amount of the gross margin when inventory is sold. (Consider the effects of both parts of this event.)
Answer the following statement true (T) or false (F)
True
When a perpetual inventory system is used, recording the sale increases assets (cash or accounts receivable) and stockholders' equity (retained earnings) by the selling price of the inventory. Sales revenue and net income increase by the same amount. Recording the cost of the merchandise sold decreases assets (merchandise inventory) and stockholders' equity (retained earnings) by the cost of the inventory. The expense (cost of goods sold) increases and net income decreases by that same amount. The net effect on assets and stockholders' equity is an increase to each by the amount of the gross margin (or the selling price minus the cost of the inventory sold).
You might also like to view...
In the context of the history of American business, during the _____, businesses began to develop distinctive identities to help customers understand the differences among various products.
A. industrial revolution B. entrepreneurship era C. marketing era D. relationship era
Generally, a personal umbrella policy is an expensive policy that provides excess liability insurance over basic underlying contracts
Indicate whether this statement is true or false.
A self-selected sample represents the sampled population but not the target population
Indicate whether the statement is true or false
The International Organization for Standardization developed a quality management standard that relies upon several quality management areas including management, resources and realization
Indicate whether the statement is true or false