Yowell Company granted a sales discount of $360 to a customer when it collected the amount due on account.Yowell uses the perpetual inventory system.Which of the following answers reflects the effects on the financial statements of only the discount?

Question

Quizplus · Accepted Answer

The sales discount would result in a decrease in revenue and a decrease in accounts receivable, both by the amount of the discount granted. However, it would not affect inventory or cost of goods sold. Therefore, only the balance sheet accounts (accounts receivable) and the income statement accounts (revenue) would be impacted. Choice A is incorrect because cost of goods sold is not affected. Choice B is incorrect because inventory is not affected. Choice D is incorrect because it suggests that there is a decrease in cost of goods sold, which is not the case.

Yowell Company Granted a Sales Discount of $360 to a Customer