Question

SX company sold merchandise on account for $18,300. The merchandise had cost the company $8,300. What is the effect of the sale on the income statement?

A. Revenue: $18,300; Cost of Goods Sold: $8,300
B. Revenue: $10,000; Cost of Goods Sold: $8,300
C. Revenue: $18,300; Net Income: $10,000
D. Revenue: $10,000; Net Income: $1,500

Answer 1

The sale would result in a revenue of $18,300 and a Cost of Goods Sold of $8,300 on the income statement, which would indicate a gross profit but not the net income as other expenses are not considered.

Step-by-step explanation:

The impact of the sale on the income statement for SX company would reflect the full amount of sales revenue generated from merchandise sold on account as well as the cost of the merchandise that was sold. Given the numbers provided, the income statement would show a revenue of $18,300, which is the total sales amount. It would also report a Cost of Goods Sold (COGS) of $8,300, which is the cost to the company for the merchandise that was sold. The difference between the revenue and COGS represents the gross profit, not the net income, because other expenses have not been subtracted. Therefore, the correct choice reflecting the effect of the sale on the income statement would be option A: Revenue: $18,300; Cost of Goods Sold: $8,300.