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 is considered a product cost under both the perpetual and periodic inventory systems?

Sales commissions

Direct materials used in production

Advertising expense

Office supplies expense

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Verified step by step guidance

Understand the concept of product costs: Product costs are costs that are directly associated with the production of goods. These include direct materials, direct labor, and manufacturing overhead. They are capitalized as inventory and expensed as cost of goods sold when the product is sold.

Differentiate between product costs and period costs: Period costs, such as sales commissions, advertising expenses, and office supplies expenses, are not directly tied to production. They are expensed in the period they are incurred and do not become part of inventory.

Recognize the role of inventory systems: Both perpetual and periodic inventory systems track product costs as part of inventory. The perpetual system updates inventory continuously, while the periodic system updates inventory at the end of the accounting period.

Identify direct materials as a product cost: Direct materials are raw materials that are directly used in the production of goods. These are always considered product costs under both inventory systems because they are integral to the manufacturing process.

Conclude that direct materials used in production are the correct answer: Since direct materials are a product cost and are treated the same way under both perpetual and periodic inventory systems, they are the correct choice in this scenario.