Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

Financial Accounting

4. Merchandising Operations

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

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Multiple Choice

Which of the following costs are included in merchandise inventory under both the perpetual and periodic inventory systems?

Advertising expenses

Freight-in costs

Sales commissions paid to sales staff

Purchase price of goods

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Verified step by step guidance

Understand the concept of merchandise inventory: Merchandise inventory includes all costs incurred to acquire goods and prepare them for sale. These costs are capitalized as part of inventory until the goods are sold.

Identify the costs that are directly related to acquiring inventory: Freight-in costs and the purchase price of goods are directly related to bringing inventory to its intended location and condition for sale. These costs are included in merchandise inventory under both perpetual and periodic inventory systems.

Exclude costs that are not directly related to inventory acquisition: Advertising expenses and sales commissions are considered period costs. They are expensed in the period incurred and are not included in merchandise inventory.

Understand the difference between perpetual and periodic inventory systems: Both systems account for inventory costs similarly when it comes to capitalizing freight-in costs and purchase price. The main difference lies in how inventory updates are recorded (perpetual updates continuously, periodic updates at the end of the period).

Summarize the included costs: Under both inventory systems, the purchase price of goods and freight-in costs are included in merchandise inventory, as they are necessary to acquire and prepare the goods for sale.