Why Are Inventories Included in the Computation of Net Income

question 56

Multiple Choice

Why are inventories included in the computation of net income?

• A) to determine cost of goods sold
• B) to determine sales revenue
• C) to determine merchandise returns
• D) Inventories are not included in the computation of net income.

Comprehend how transactions are recorded in the general and specialized journals.

Understand the role of subsidiary ledgers and control accounts in the accounting process.

Distinguish between different types of transactions and their appropriate journal entries.

Grasp the concept of internal controls and their significance in accounting system design.

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Definitions:

Cross Elasticity of Demand

A measurement of how the quantity demanded of one good responds to a change in the price of another good.

Desktop Computer Sales

The volume or monetary value of desktop computers sold in a specific time frame, reflecting consumer demand and technological trends.

Computer Company

A business entity that designs, manufactures, markets, or sells computer hardware, software, or related services.

Price Elasticity of Supply

A measure of how much the quantity supplied of a good responds to a change in the price of that good, represented as a ratio of percentage change in quantity supplied to the percentage change in price.