Multiple Choice
Which of the following statements regarding inventory errors is true?
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5. Inventory
Inventory Errors
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Which of the following interactions with vendors would potentially lead to inventory reductions?
A
Placing a new purchase order with the vendor
B
Negotiating extended payment terms for inventory purchases
C
Returning defective goods to the vendor
D
Receiving additional inventory on consignment
Verified step by step guidance1
Understand the context of inventory reductions: Inventory reductions occur when the quantity of goods held by a company decreases due to specific actions or events.
Analyze each option provided in the problem: Evaluate how each interaction with vendors impacts inventory levels.
Option 1: Placing a new purchase order with the vendor increases inventory levels, as new goods are ordered and will be added to inventory upon receipt.
Option 2: Negotiating extended payment terms for inventory purchases does not directly affect inventory levels; it only changes the payment timeline for goods already purchased.
Option 3: Returning defective goods to the vendor reduces inventory levels because the defective goods are removed from the company's inventory and sent back to the vendor.
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