Touch Tronix, Inc

question 111

Multiple Choice

Touch Tronix, Inc.sells component parts to Advanced Communications, Inc.a cell phone manufacturer.During December 2011, Touch Tronix, Inc.sold €680,000 of goods to Advanced Communications, Inc.on account for €880,000.Advanced Communications, Inc.was dissatisfied with 25% of the merchandise it received due to inferior quality.On December 21, 2011, Advanced Communications, Inc.returns the goods to Touch Tronix, Inc.for credit.Which of the following is true regarding the statement of financial position for Advanced Communications, Inc.at December 31, 2011?

• A)Assets will increase by €170,000 and liabilities will increase by €170,000.
• B)Assets will decrease by €170,000 and liabilities will decrease by €170,000.
• C)Assets will decrease by €220,000 and liabilities will decrease by €220,000.
• D)Assets will increase by €220,000 and liabilities will increase by €220,000.

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Definitions:

Cycle Inventory

The portion of inventory that companies hold to facilitate smooth production and sales operations, fluctuating based on production cycle needs.

Low-Value Product

Products that have a low price point or perceived economic value to the consumer, often resulting in slim profit margins.

High Demand

A situation where the desire and need for a product or service greatly exceeds the available supply within a market.

Transportation

The movement of goods and people from one location to another using various modes such as road, rail, air, and sea.