If a Company Uses the Periodic Inventory System, What Is

question 132

Multiple Choice

If a company uses the periodic inventory system, what is the impact on the current ratio of including goods in transit F.o.b. shipping point in purchases, but not ending inventory?

• A) Overstate the current ratio.
• B) Understate the current ratio.
• C) No effect on the current ratio.
• D) Not sufficient information to determine effect on the current ratio.

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Definitions:

Subsidence

The sinking or settling of the Earth's surface, often due to natural geological processes or human activities.

Uplift

A process that causes regions of the Earth's surface to rise due to structural changes in the Earth's crust or mantle.

Continental Crust

The thick, buoyant part of the Earth's crust that forms the continents, contrasted with the denser oceanic crust.

Thickness

The measurement from one surface of an object or material to the opposite surface.