Chapter 20 Accounting True/False Questions

The net income of a business can be increased by maintaining a merchandise inventory that is larger than needed.

False

A merchandise inventory evaluated at the end of a fiscal period is known as a periodic inventory.

True

A minimum inventory balance is the amount of merchandise that will typically last until ordered merchandise can be received from vendors.

True

A periodic inventory conducted by counting, weighing, or measuring items of merchandise on hand is also called a physical inventory.

True

Many merchandising businesses use a POS terminal to read UPC codes on products and update the stock ledger.

True

Merchandise inventory on hand is typically the largest asset of a merchandising business.

True

The gross profit method makes it possible to prepare monthly income statements without taking a physical inventory.

True

A perpetual inventory system provides day-to-day information about the quality of merchandise on hand.

False

The first-in, first-out (FIFO) method is used to determine the quantity of each type of merchandise on hand.

False

The only financial statement on which the value of merchandise on hand is reported is the income statement.

False