The inventory turn over ratio is measures as A. Cost of goods sold divided by av

Question

The inventory turn over ratio is measures as A. Cost of goods sold divided by average inventory. B. Average inventory decided by gross profit. C. Gross profit decided by net sales. D. Net sales divided by average inventory.

The practice of using the lower of cost and net realizable value to evaluate inventory reflects which of the following accounting principles. A. Matching principle. B. Revenue recognition. C. Conservatism. D. Materiality.

Gross profits is calculated as net sales minus. A Nonoperating expenses and income tax expense. B. Operating expenses. C. Cost of goods sold, D. All of the other answers are subtracted from net sales.

Explanation / Answer

1)The inventory turn over ratio is measures as A. Cost of goods sold divided by average inventory , where, Avearge Inventory= (Opening Inventory+Ending Inventory)/2 2)The practice of using the lower of cost and net realizable value to evaluate inventory reflects   C. Conservatism.-Principle of recognising expenses ,liabilities & possible losses as early as is anticipated- so as to play it safe- to the owners and other users of the financial statistics of the company. 3)Gross profits is calculated as net sales minus C. Cost of goods sold . From this figure, Operating and non-operating expenses are deducted and revenues are added to arrive at the income before tax.

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