The Trial Balance of Marley Motorcycles Shows Merchandise Inventory of $80,000

question 72

Multiple Choice

The trial balance of Marley Motorcycles shows Merchandise Inventory of $80,000. Based on a count taken on December 31, merchandise inventory at the end of the year actually totaled
$92,000. The company uses a periodic inventory system. The adjusting entry to record the new merchandise inventory balance would be:

• A)a debit to Merchandise Inventory of 80,000 and a credit to Income Summary for $80,000.
• B)a debit to Purchases of $92,000 and a credit to Income Summary for $92,000.
• C)a debit to Merchandise Inventory of $92,000 and a credit to Income Summary for $92,000.
• D)a debit to Merchandise Inventory of $12,000 and a credit to Purchases for $12,000.

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Definitions:

Total Asset Turnover Ratio

An economic indicator that evaluates how effectively a business utilizes its assets to produce sales income.

Return on Assets Ratio

A financial metric indicating how profitable a company is relative to its total assets, calculated by dividing net income by total assets.

Accruing Interest Expense

The process of recording interest expense that has been incurred but not yet paid in the financial statements.

Stockholders' Equity

The portion of a company's assets that can be claimed by its owners, equal to total assets minus total liabilities.