Questions: The inventory turnover is calculated by dividing cost of goods sold by beginning inventory. ending inventory. average inventory. 365 days. The amount of cost of good available for sale during the year depends on the amounts of beginning merchandise inventory and cost of goods sold. beginning merchandise inventory, net cost of purchases, and ending merchandise inventory. beginning merchandise inventory, cost of goods sold, and ending merchandise inventory. beginning merchandise inventory and net costs of purchases. A merchandiser will earn an operating income of exactly $0 when net sales equals cost of goods sold. cost of goods sold equals gross margin. operating expenses equal net sales. gross profit equals operating expenses. At the beginning of the year, Uptown Athletic had an inventory of $400,000. During the year, the company purchased goods costing $1,500,000. If Uptown Athletic reported ending inventory of $500,000 and sales of $2,000,000, their cost of goods sold and gross profit rate would be $1,000,000 and 70%. $1,400,000 and 30%. $1,000,000 and 30%. $1,400,000 and 70%. Cash equivalents include money market accounts, commercial paper, and U.S. treasury bills held for ninety days or less. True or False
The correct answer and explanation is:
Here are the correct answers along with explanations:
- The inventory turnover is calculated by dividing cost of goods sold by:
Correct Answer: average inventory
Explanation: Inventory turnover is a financial metric that shows how efficiently a company manages its inventory. It is calculated using the formula: Inventory Turnover=Cost of Goods Sold (COGS)Average Inventory\text{Inventory Turnover} = \frac{\text{Cost of Goods Sold (COGS)}}{\text{Average Inventory}} where average inventory is calculated as: Beginning Inventory+Ending Inventory2\frac{\text{Beginning Inventory} + \text{Ending Inventory}}{2} A higher turnover indicates efficient inventory management, while a lower turnover suggests overstocking or slow sales. - The amount of cost of goods available for sale during the year depends on:
Correct Answer: beginning merchandise inventory and net costs of purchases
Explanation: The cost of goods available for sale (COGAS) is the total inventory a business has available to sell during a period. It is calculated as: COGAS=Beginning Inventory+Net Purchases\text{COGAS} = \text{Beginning Inventory} + \text{Net Purchases} where net purchases include purchases minus purchase returns, allowances, and discounts. - A merchandiser will earn an operating income of exactly $0 when:
Correct Answer: gross profit equals operating expenses
Explanation: Operating income is calculated as: Operating Income=Gross Profit−Operating Expenses\text{Operating Income} = \text{Gross Profit} – \text{Operating Expenses} If gross profit (Net Sales – Cost of Goods Sold) exactly matches operating expenses, the result is zero operating income, meaning the business has neither profit nor loss. - Uptown Athletic’s cost of goods sold and gross profit rate:
Correct Answer: $1,400,000 and 30%
Explanation: COGS=Beginning Inventory+Purchases−Ending Inventory\text{COGS} = \text{Beginning Inventory} + \text{Purchases} – \text{Ending Inventory} =400,000+1,500,000−500,000=1,400,000= 400,000 + 1,500,000 – 500,000 = 1,400,000 Gross Profit = Sales – COGS = 2,000,000 – 1,400,000 = 600,000
Gross Profit Rate = (Gross Profit / Sales) × 100 = (600,000 / 2,000,000) × 100 = 30% - Cash equivalents include money market accounts, commercial paper, and U.S. treasury bills held for ninety days or less.
Correct Answer: True
Explanation: Cash equivalents are short-term, highly liquid investments that are readily convertible to cash with insignificant risk of value change. These include money market accounts, commercial paper, and U.S. treasury bills with maturities of 90 days or less. These instruments are used to ensure liquidity while earning a small return.
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