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 should be added to the buyer's inventory account under both the perpetual and periodic inventory systems?

Sales commissions paid to sales staff

Freight-in costs paid by the buyer

Advertising expenses for the product

Freight-out costs paid by the seller

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Verified step by step guidance

Understand the concept of inventory costs: Inventory costs include all costs necessary to bring the goods to their intended location and condition for sale. These costs are capitalized as part of the inventory value.

Identify the costs listed in the problem: Sales commissions, freight-in costs, advertising expenses, and freight-out costs.

Analyze each cost: Sales commissions and advertising expenses are considered period costs and are expensed in the income statement, not added to inventory. Freight-out costs are costs incurred by the seller to deliver goods to the buyer and are also expensed, not added to inventory.

Focus on freight-in costs: Freight-in costs are transportation costs paid by the buyer to bring inventory to their location. These costs are directly related to acquiring inventory and are added to the inventory account under both perpetual and periodic inventory systems.

Conclude that freight-in costs are the correct answer: Freight-in costs are capitalized as part of inventory under both inventory systems because they are necessary to prepare the goods for sale.