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Homework answers / question archive / The basic comprehension of the relationship of inventory on the balance sheet and COGS as an expense on the income statement is a key concept for this class
The basic comprehension of the relationship of inventory on the balance sheet and COGS as an expense on the income statement is a key concept for this class. For merchandising companies and their Inventory account, all of the following are true except________ Multiple Choice .
A. If the company's inventory balance begins the year with a positive debit balance and ends the year at zero, the company must not have sold any inventory during the year.
B. An increase in the inventory balance from the beginning of the year to the end of the year would mean that the company has purchased more inventory than they sold.
C. If the company's inventory balance begins the year at zero and ends the year with a debit balance, the company must have purchased more inventory than they sold.
D. A decrease in the inventory balance from the beginning of the year to the end of the year would mean that the company has sold more inventory than they purchased.
which statement is False?
The False Statement is A. If the Company's inventory balance begins with a positive debit balance and ends the year at zero, the company must not have sold any inventory during the year.
The above statement is false because, the company at the begoinning of the year has debit balance which means the company has sufficient inventory at the beginning of the year. At the end of the year, the company has zero balance in the inventory. This means that the company has sold all the inventory during the year (more than that of what it has purchased during the year). But the statement says that the company have not sold any inventory during the year. So there is difference in the statement. So the False statement is A
Reasons for other options being correct:
For B: increase in the inventory balance from the beginning of the year to the end of the year - the company has purchased more inventory than they sold. The statement is Correct
For C: inventory balance begins the year at zero - ends the year with a debit balance (So increase in inventory balance), which means that the company must have purchased more inventory than they sold. The statement is Correct.
For D: decrease in the inventory balance from the beginning of the year to the end of the year - the company has sold more inventory than they purchased. The Statement is Correct.
So the false statement is A
