The operating cycle for a merchandiser that sells only for cash moves from:
A) Accounts receivable to inventory to cash sales.
B) Accounts receivable to purchases of merchandise to inventory to cash sales.
C) Inventory to purchases of merchandise to cash sales.
D) Purchases of merchandise to inventory to accounts receivable to cash sales.
E) Purchases of merchandise to inventory to cash sales.

Question

Quizplus · Accepted Answer

A merchandiser that sells only for cash does not have accounts receivable, so option A and D can be eliminated. Option C is also incorrect as it skips the purchase of merchandise, which is an important step in the operating cycle. Option B includes accounts receivable even though the merchandiser only sells for cash. Therefore, the best choice is E, where the operating cycle starts with purchases of merchandise, moves to inventory, and then ends with cash sales.

The Operating Cycle for a Merchandiser That Sells Only for Cash