The Grand Department Store Had Net Credit Sales of $12,000,000

question 14

Multiple Choice

The Grand Department Store had net credit sales of $12,000,000 and cost of goods sold of $8,000,000 for the year.The average inventory for the year amounted to $1,600,000. The inventory turnover ratio for the year is

• A) 4.0 times.
• B) 7.2 times.
• C) 5.0 times.
• D) 2.5 times.

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Definitions:

Incurred

Describes expenses that have been realized or experienced by a business or individual.

Matching Principle

An accounting principle that expenses should be recorded in the same period as the revenues they helped to generate, to provide a more accurate picture of financial performance.

Deferrals

Accounting transactions that involve recognition of revenues or expenses in a period different from when they are actually received or paid, to match revenues with expenses in the appropriate period.

Accruals

Accounting adjustments for revenues that have been earned or expenses that have been incurred but are not yet recorded in the accounts.