All of the Following Statements Regarding Inventory Shrinkage Are True

question 193

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

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Definitions:

Capital Budgeting

The method of assessing and choosing long-term investments consistent with the objective of maximizing shareholder wealth.

Fixed Assets

Long-term tangible assets used in the operation of a business, such as buildings, machinery, and equipment, which are not intended for sale.

Initial Outlays

The initial investments required to start a project or purchase an asset, often including costs such as capital expenditure and working capital.

Revenue Forecasts

Predictions about the amount of money a company is expected to generate in future periods through sales or other income.