1. Why are inventories included in the computation of net income?

a. To determine cost of goods sold.

b. To determine sales revenue.

c. To determine merchandise returns.

d. Inventories are not included in the computation of net income.

2. Which of the following is a characteristic of a perpetual inventory system?

a. Inventory purchases are debited to a Purchases account.

b. Inventory records are not kept for every item.

c. Cost of goods sold is recorded with each sale.

d. Cost of goods sold is determined as the amount of purchases less the change in inventory.