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True or False (A=Ture; B=False) 1 A merchandising companys operating cycle begins with the acquisition of inventory and ends
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Answer #1

1]

True. Operating cycle = days in inventory + days receivable. For a merchandising company, the operating cycle begins with purchase of inventory and ends with collection of receivables.

2]

True. Inventory shrinkage is difference between inventory as in the books and actual physical inventory in the warehouse. This difference could be due to normal wastage, damage, pilferage etc.

3]

True. FOB shipping point means that the title of goods passes from the seller to the buyer when the goods leave the seller's place of business or seller's shipping point.

4]

False. Under periodic inventory system, only one journal entry is required to record sales. A perpetual inventory system required two journal entries.

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