Find the ability of a business to pay the debts

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Problem 1: The ability of a business to pay its debts as they come due and to earn a reasonable amount of income is referred to as:

a. solvency and leverage

b. solvency and liquidity

c. solvency and profitability

d. solvency and equity

Problem 2: Under the perpetual inventory system, in addition to making the entry to record a sales return, an entity would

a. debit Cost of Goods Sold and credit Merchandise Inventory.

b. debit Cost of Goods Sold and credit Purchases.

c. Merchandise Inventory and credit Cost of Goods Sold.

d. make no additional entry until the end of the period.

Reference no: EM132739252

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