Rejoice Company sold $5,000 of inventory to a customer. The customer paid for th
ID: 2544115 • Letter: R
Question
Rejoice Company sold $5,000 of inventory to a customer. The customer paid for the inventory with a Visa credit card. After receiving the inventory the customer realized that $500 of the inventory was defective and returned the inventory to Rejoice Company. Which of the following is true regarding how the company would account for the fees charged by Visa and the sales returns. The sales returns would affect gross proft, the credit card fee would not affect gross pront, but neither the credit card fee nor sale returns would affect net income. The sales returns would affect gross profit, the credit card fee would not affect gross profit, but both the credit card fee and sale returns would affect net income. The credit fee would affect gross profit, the sales returns would not affect gross profit, but both the credit card fee and sale returns would affect net income. Both the credit card fee and the sales returns would affect gross proft and net income. The credit fee would affect gross profit, the sales returns would not affect gross proft, but neither the credit card fee nor sale returns would affect net income.Explanation / Answer
Answer is B. sales return will affect gross profit, the credit card fee would not affect gross profit but both credit card fee and sales return will affect net income.
Explanation- sales return affects net sales which affects both gross profit and net income. credit card fee is an operating expense and will affect net income but not gross profit.