1)As a company's inventory turnover ratio increases, the frequency with which it is selling its inventory decreases

1)False

Inventory turnover ratio means the how frequently a business consumed or sold the stock in a specific period of time. Increase in the inventory turnover ratio shows that the demand for the product among consumers increases. So when the inventory turnover ratio increases the frequency of selling of goods also increases.

2)

True

The LIFO, FIFO and weighted average method are the different methods used by a manufacturing business to estimate the value of the stock. Companies use and follow LIFO method to make tax savings from their overall income. ie, the net income of the business will reduce as the latest cost of purchases are decreased and cost of goods sold is increased resulting in lower taxable income.

3)

The answer is TRUE

Net Purchases is the total cost incurred in bringing the inventories to its destination.

4)

The correct option is a. A sale of land.

Under the installment method, the vendor must receive a token of payment in the year before selling the property and only the sale of land is recognized as a gain in the installment method.

The explanation for incorrect options:

• Option B: Sale of inventory is not recognized as a gain under the installment method. Hence, it is an incorrect option.
• Option C: As per section 1245, any profit on depreciation recapture due to the sale of equipment is not recognized as a gain in the installment method. Hence, it is an incorrect option.
• Option D: Any gain earned on the sale of marketable securities is treated as ineligible under the installment method. Hence, it is an incorrect option.