ACCT207 Midterm: EXAM 2 REVIEW
4 Aug 2018
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It is determined by deducting cost of goods sold from net sales: this computation uses net sales, which takes into account sales returns and allowances and sales discounts, gross profit represents the merchandising profit of a company. Income statement effects: balance sheet effects, tax effects. In periods of changing prices, the cost flow assumption can have significant impacts both on income and evaluations of income, such as the following. In a period of inflation, fifo produces a higher net income because lower unit costs of the first units purchases are matches against revenue. In a period of inflation, lifo produces a lower net income because of higher unit costs of the last goods purchased are matches against revenue. In a multiple step income statement, cost of goods sold is subtracted from net sales. It indicated the liquidity of inventory by measuring the number of times the average inventory turns over during the year.
