Under a Perpetual Inventory System, Acquisition of Merchandise for Resale

question 45

Multiple Choice

Under a perpetual inventory system, acquisition of merchandise for resale is debited to

• A)the Inventory account.
• B)the Purchases account.
• C)the Supplies account.
• D)the Cost of Goods Sold account.

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Definitions:

Effective Utilization

Effective utilization refers to how efficiently resources, such as labor and equipment, are used to produce goods or services.

EBIT

Earnings before interest and taxes; a measure of a company's profitability that excludes interest and income tax expenses.

Quick Ratios

The quick ratio, also known as the acid-test ratio, measures a company's ability to meet its short-term obligations with its most liquid assets.

Liquidity Position

A measure of the ability of an entity to meet its short-term financial obligations using assets that can be quickly converted to cash.