If material, the gross profit from installment sales should be
A) reported in the statement of stockholders' equity
B) reported in other comprehensive income on the balance sheet
C) reported in other income on the income statement
D) recognized separately from the gross profit on other sales in the income statement

Question

Quizplus · Accepted Answer

The gross profit from installment sales should be recognized separately from the gross profit on other sales in the income statement. This is because installment sales involve recognizing revenue and cost of goods sold over a period of time, which can distort the gross profit figure if combined with other sales. Therefore, it is important to separately identify the gross profit from installment sales to get a clear understanding of the company's profitability.

If Material, the Gross Profit from Installment Sales Should Be