Right Company sold $3,000 of merchandise for $10,000. a) What is the profit to be reflected...
Right Company sold $3,000 of merchandise for $10,000.
a) What is the profit to be reflected on the income statement for the month?
b) If $8,000 of the sales were on credit and $2,000 were in cash, what amount of total sales would be reflected on the income statement for the month?
Homework Answers
a. Amount of profit to be reflected = Sales value - Cost
= $ 10,000 - $ 3,000
= $ 7,000
b. Total amount of sales to be reflected = $ 10,000.
Revenue is recognized once the ownership is transferred and not on cash realization and as per accrual concept, amount to be recognized when ever it is incurred. So, total sales (credit and cash ) to be recognized.
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