Assume That a Company Uses a Perpetual Inventory System and Records

question 202

Multiple Choice

Assume that a company uses a perpetual inventory system and records the return of inventory previously purchased on account a debit to Accounts Payable and a credit to Inventory.This entry is:

• A) incorrect and will cause assets to be overstated
• B) incorrect and will cause assets to be understated
• C) incorrect and will cause liabilities to overstated
• D) correct

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Definitions:

Absolute Advantage

The ability of a country, individual, or firm to produce more of a good or service with the same amount of resources compared to others.

Trade

The exchange of goods and services between parties, which can be within or across national borders.

Trade Deficit

A situation where a country's imports of goods and services exceed its exports, resulting in a negative balance of trade.

Productive Resource

An asset or input used in the production of goods and services, such as labor, land, and capital.