When Preparing the Worksheet for a Merchandising Business Using the Perpetual

question 9

Multiple Choice

When preparing the worksheet for a merchandising business using the perpetual inventory system,which of the following statements is incorrect?

• A)The merchandiser's worksheet carries the account Cost of Goods Sold.
• B)The main new account is the Merchandise Inventory account.
• C)The worksheet procedures are not similar to the worksheet procedures for a service company.
• D)The Merchandise Inventory account must be adjusted based on a physical count due to inventory shrinkage.

---

Definitions:

Accounts Receivable

A financial record representing the money owed to a company by its customers for goods or services delivered on credit.

Profitability Ratio

A category of financial metrics used to assess a business's ability to generate earnings relative to its revenue, assets, equity, or other financial aspects.

Payout Ratio

A financial metric indicating the proportion of earnings a company pays to its shareholders in dividends, expressed as a percentage of the company's net income.

Times Interest Earned

Times Interest Earned is a financial metric that measures a company's ability to meet its interest obligations, calculated as earnings before interest and taxes divided by interest expense.