A Motorcycle Manufacturer Produced 8,000 Motorcycles, but Sold Only 6,500

question 180

Multiple Choice

A motorcycle manufacturer produced 8,000 motorcycles, but sold only 6,500 of them. We would classify the remaining 1,500 motorcycles as

• A) a loss to the firm.
• B) part of the firmʹs tangible capital.
• C) part of the firmʹs intangible capital.
• D) a factor of production.

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Definitions:

Net Method

The net method is an accounting practice where purchase discounts are subtracted upfront from the cost of inventory, leading to the recording of purchases at their net cost if payment is made within a discount period.

Recording Purchases

The process of documenting transactions related to acquiring goods or services, essential for accurate financial reporting and inventory management.

Cash Discounts

These are deductions allowed by sellers on invoice amounts if the buyer pays promptly within a specified period, serving as an incentive for early payment.

Perpetual Inventory System

An inventory management method where records are continuously updated to reflect buys, sells, and stock levels in real-time.