Question

Edwards Shoe Store sold shoes that cost the company $5,700 for $8,200. Which of the following shows how the recognition of the cost of goods sold will affect the Company's financial statement? (Ignore the effects of the associated revenue recognition.)

Answer 1

The recognition of the cost of goods sold will affect the company's financial statement by reducing its gross profit and increasing its cost of goods sold.

Step-by-step explanation:

The recognition of the cost of goods sold will affect the company's financial statement by reducing its gross profit and increasing its cost of goods sold.

In this case, Edwards Shoe Store sold shoes for $8,200 that cost the company $5,700. The cost of goods sold will be recorded as $5,700 on the income statement, reducing gross profit by $5,700. This will result in a lower net income for the company.

Therefore, the financial statement will show a decrease in gross profit and an increase in the cost of goods sold.