157. Explain the way in which costs flow through the merchandise inventory account to a merchandiser’s income statement. 158. What is the acid-test ratio? How does it measure a company's liquidity? ...

157. Explain the way in which costs flow through the merchandise inventory account to a merchandiser’s income statement.

158. What is the acid-test ratio? How does it measure a company's liquidity?

159. What is gross margin ratio? How is it used as an indicator of profitability?

160. What does the acronym FOB stand for? Describe the differences between FOB shipping point (or FOB factory) and FOB destination.

FOB stands for and it determines who pays transportation and other incidental costs of shipping goods. If goods are shipped FOB shipping point, also called FOB factory, ownership transfers to the buyer when the goods depart the seller's place of business, and the seller records revenue at that time. The buyer is then responsible for paying shipping costs and bearing the risk of damage or loss while goods are in transit.If goods are shipped FOB destination, ownership of the goods transfers to the buyer when the goods arrive at the buyer's place of business. The seller is responsible for paying shipping costs and bears the risk of damage or loss in transit. The seller does not record revenue until the goods arrive at the destination because the transaction is not complete before that point.

161. Describe the recording process (including costs) for thetypes of transactions involved in purchasing merchandise inventory when a perpetual inventory system is used.