When a Corporation Uses Profits to Pay for the Purchase

question 124

Multiple Choice

When a corporation uses profits to pay for the purchase of new capital equipment, this is know as

• A) reinvestment.
• B) a coupon payment.
• C) dividend.
• D) collusion.

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Definitions:

Periodic Inventory System

An inventory accounting system where updates to the quantity and cost of inventory are made at specified intervals, such as monthly or yearly, not continuously.

FIFO Method

FIFO method, or First-In, First-Out, is an inventory costing method where the first items placed into inventory are the first ones sold, used for calculating cost of goods sold and ending inventory.

Cost of Goods Sold

Cost of goods sold is the direct costs attributable to the production of the goods sold by a company, including the cost of materials and labor.

Periodic System

An inventory system in which the inventory level is updated and cost of goods sold is calculated at the end of an accounting period.