Earlier this week you closed a deal to sell 20 houses you constructed in a new neighborhood. Like any other product that a business sells, these houses were considered inventory until you sold them. The houses were sold to another developer who is buying the surrounding land and would like to enlarge the neighborhood; as a result, he would like to control marketing and sales for the entire development. The developer bought the houses at a slightly discounted price to facilitate their resale at a profit. You benefited from the sale because you avoided the necessity of selling the houses one at a time and the risk of carrying unsold inventory. How should this $4 million be categorized on your income statement? O a. Should appear as net income on the income statement. O b. Should not appear on the income statement because you received cash. Oc. Should appear as operating income on the income statement.

Earlier this week you closed a deal to sell 20 houses you constructed in a new neighborhood. Like any other product that a business sells, these houses were considered inventory until you sold them. The houses were sold to another developer who is buying the surrounding land and would like to enlarge the neighborhood; as a result, he would like to control marketing and sales for the entire development. The developer bought the houses at a slightly discounted price to facilitate their resale at a profit. You benefited from the sale because you avoided the necessity of selling the houses one at a time and the risk of carrying unsold inventory. How should this $4 million be categorized on your income statement? O a. Should appear as net income on the income statement. O b. Should not appear on the income statement because you received cash. Oc. Should appear as operating income on the income statement.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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