Due to an oversight, the sale was not recorded until January 1993, and the merchandise, which was sold at a 25 percent markup, was included in Occident's perpetual inventory on December 31, 1992. A. Interest expense is decreased, so net income is increased. B. Interest expense is increased, so net income is decreased. C. Interest revenue is increased, so net income is increased. D. Interest revenue is decreased, so net income is decreased.
Payment is made to the vendor in the month the manufacturer uses the barrels in production.
The vendor records revenues when the barrels are shipped and makes no adjusting entries to record unearned revenues until the December 31st closing of the books. At the end of July 1997, the manufacturer had 40 barrels of ink on consignment. During August 1997, the vendor consigned 50 barrels and received payment for 30 barrels. However, the company is contemplating aging its accounts receivable and using this as a basis for estimating its bad debts, as it is believed that this will provide a better estimate of the uncollectible accounts. The activity of carburetor 2642J during the month of March is presented below.