Question

On the income statement, a merchandiser would normally give a single sales figure (the sum of all its individual sales accounts) because

Select one:

a. it is too time consuming to separate all individual sales terms.

b. merchandisers only have one product available for sale.

c. the details are not relevant to most users of the income statement.

d. perpetual inventory systems cannot separate various sales items.

Question 14

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Which of the following best indicates that a company is managing its inventory efficiently?

Select one:

a. a low gross profit margin

b. a high days sales in inventory ratio

c. a low inventory turnover ratio

d. a high inventory turnover ratio

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Which of the following statements is correct?

Select one:

a. Under a periodic system, the Merchandise Inventory account is only updated once per period.

b. Cost of goods sold computed under a periodic system would be higher than under a perpetual system.

c. Under a perpetual system, the Merchandise Inventory account is only updated once per period.

d. The value of inventory computed under a periodic system would be lower than under a perpetual system

Answer 1

Question 14:On the income statement, a merchandiser would normally give a single sales figure (the sum of all its individual sales accounts) because

Answer:-  c. the details are not relevant to most users of the income statement.

Reason:- A merchandising company is into the business of purchasing and resaling. So providing individual line item is not necessary or material for investors. Only the internal departments would require such details.

Question text:Which of the following best indicates that a company is managing its inventory efficiently?

Answer:- d. a high inventory turnover ratio

Reason:- It is a measure of how many times average inventory is turned or sold during a period. Higher the ratio beter the inventory efficiency.

Question text:Which of the following statements is correct?

Answer:- a. Under a periodic system, the Merchandise Inventory account is only updated once per period.

Reason:- Periodic system updates invetory and cost of goods sold after a physical count once per period.