When Preparing the Worksheet for a Merchandising Business Using the Perpetual

question 9

Multiple Choice

When preparing the worksheet for a merchandising business using the perpetual inventory system,which of the following statements is incorrect?

• A)The merchandiser's worksheet carries the account Cost of Goods Sold.
• B)The main new account is the Merchandise Inventory account.
• C)The worksheet procedures are not similar to the worksheet procedures for a service company.
• D)The Merchandise Inventory account must be adjusted based on a physical count due to inventory shrinkage.

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Definitions:

Accounts Receivables

Represents money owed to a company by its customers for goods or services delivered but not yet paid for.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year, calculated by dividing current assets by current liabilities.

Quick Ratio

A liquidity measure that indicates a company's ability to cover its short-term liabilities with its most liquid assets, without selling inventory.

Liquidity

The ease with which an asset, or security, can be converted into ready cash without affecting its market price.