All of the Following Adjustments Can Be Used to Understate

question 2

Multiple Choice

All of the following adjustments can be used to understate accounts payable EXCEPT:

• A) recording purchases after year end.
• B) overstating purchase discounts.
• C) understating purchase returns.
• D) omitting purchases.

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Definitions:

Acid-Test Ratio

A financial indicator that assesses the capacity of a business to settle its short-term obligations using its liquid assets.

Single-Step Income Statement

A form of income statement where all expenses are subtracted from total revenue in one step to arrive at net income.

FOB Destination

A term used in shipping indicating that the seller is responsible for the freight costs and owns the goods in transit until they are delivered to the buyer's location.

Merchandise Inventory

The goods a retail store has purchased and intends to sell to customers, representing one of the retailer's primary assets.