When a Periodic Inventory System Is Used,________

question 211

Multiple Choice

When a periodic inventory system is used,________.

• A)an adjusting entry is needed to record the ending Merchandise Inventory account balance
• B)the process for closing the Income Summary and Dividends accounts differs from the process used in the perpetual inventory system
• C)beginning Merchandise Inventory,Purchases,and Freight In accounts are closed via the Income Summary Account
• D)there is no need to take a physical count of inventory

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Definitions:

Margin of Safety

The difference between actual or projected sales and the break-even point; measures the risk of not covering fixed costs.

Liabilities to Stockholders' Equity

A ratio that measures the amount of liabilities a company has compared to its shareholders' equity.

Asset Turnover Ratio

A financial metric that measures the efficiency of a company in using its assets to generate sales or revenue; it is calculated by dividing net sales by average total assets.

Long-term Investments

Investments made with the intention to hold for more than one year, typically in bonds, stocks, or real estate, aiming for long-term capital growth.