All of the Following Statements Regarding Inventory Shrinkage Are True

question 52

Multiple Choice

All of the following statements regarding inventory shrinkage are true except:

• A)Inventory shrinkage refers to the loss of inventory.
• B)Inventory shrinkage is determined by comparing a physical count of inventory with recorded inventory amounts.
• C)Inventory shrinkage is recognized by debiting an operating expense.
• D)Inventory shrinkage is recognized by debiting Cost of Goods Sold.
• E)Inventory shrinkage can be caused by theft or deterioration.

---

Definitions:

Transfer Prices

Prices charged for the sale of goods or services between divisions within the same company, often used for cost allocation and performance evaluation.

Segments

Different parts or areas of a business or market that can be separately analyzed.

ROI

Return on Investment is a measure used to evaluate the efficiency or profitability of an investment, calculated by dividing net profit by the cost of the investment.

Operating Assets

Assets used by a business in its daily operations to generate income, including cash, inventory, and equipment.