True / False Questions 1. Inventory is a relatively liquid asset and usually appears above Accounts Receivable on the balance sheet. 2. The operating cycle of a merchandising company consists of (1) purchases of merchandise; (2) sales of the merchandise; and (3) collection of accounts receivable. 3. Inventory shrinkage refers to unrecorded decreases in inventory resulting from breakage, theft, and sales of inventory. 4. In a perpetual inventory system, when merchandise is purchased, it is debited to an account called Purchases. 5. In a periodic inventory system, the Cost of...