Multiple Choice Answers

In a perpetual inventory system, merchandise returned to vendors reduces the merchandise inventory account.

True
False

On a multiple-step income statement, losses on sales of fixed assets would be listed as a selling expense item.

True
False

When reconciling net income to net cash flows from operating activities on the statement of cash flows, a decrease in accounts payable would __________.

a. Be added back
b. Be subtracted
c. Not be impacted

Since merchandise inventory is normally sold within a year, how is it reported on the balance sheet?

a. As a revenue
b. As the cost of merchandise sold
c. It does not appear on the Balance Sheet
d. As a current asset.

The resources a business owns are called __________.

a. Assets
b. Liabilities
c. Products
d. Stockholders’ equity