Touch Tronix, Inc

question 91

Multiple Choice

Touch Tronix, Inc. sells component parts to Advanced Communications, Inc. a cell phone manufacturer. On December 10, 2014, Touch Tronix, Inc. sold €1,020,000 of goods to Advanced Communications, Inc. on account for €1,320,000. Terms of the sale were 2/10, net 30. On December 18, 2014, Advanced Communications, Inc. paid the account in full. Advanced Communications, Inc. uses a perpetual inventory system. Which of the following is true regarding the impact on the statement of financial position for Advanced Communications, Inc. when the payment is made on December 18, 2014?

• A) Cash decreased by €999,600.
• B) Inventory decreased by €20,400.
• C) Accounts payable decreases by €1,020,000.
• D)Inventory decreased by €26,400.

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Definitions:

Sales Mix

The proportion of different products or services that a company sells, affecting its overall profitability due to varying margins.

Margin Of Safety

The difference between actual sales and break-even sales, indicating the amount by which sales can drop before the business incurs a loss.

Contribution Margin Ratio

A measure of the profitability of a product, defined as the difference between the sales price and variable costs, expressed as a percentage of sales price.

Operating Income

EBIT, or earnings before interest and taxes, denotes the income a business generates from its fundamental activities.