In a Perpetual Inventory System a Return of Defective Merchandise

question 241

Multiple Choice

In a perpetual inventory system a return of defective merchandise by a purchaser is recorded by crediting

• A) Purchases.
• B) Purchase Returns.
• C) Purchase Allowance.
• D) Inventory.

---

Definitions:

NPV

Net Present Value, a method used to evaluate the profitability of an investment by calculating the difference between the present value of cash inflows and outflows.

IRR

Internal Rate of Return; the discount rate that makes the net present value of all cash flows from a particular project equal to zero.

Time Value of Money

The concept that money available now is worth more than the same amount in the future due to its potential earning capacity.

Payback Period

The length of time it takes for an investment to generate cash flows sufficient to recover the initial investment cost.