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 is included in finished goods inventory under both perpetual and periodic inventory systems?

Cost of completed products not yet sold

Direct labor incurred during production

Selling and administrative expenses

Direct materials used in production

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Verified step by step guidance

Understand the concept of finished goods inventory: Finished goods inventory refers to the cost of products that are completed and ready for sale but have not yet been sold. This includes all costs incurred to bring the product to its finished state.

Identify the costs that are included in finished goods inventory: These costs typically include direct materials, direct labor, and manufacturing overhead incurred during production. Selling and administrative expenses are not included as they are considered period costs.

Analyze the perpetual and periodic inventory systems: Both systems track inventory, but the method of recording transactions differs. Regardless of the system, the cost of completed products not yet sold is included in finished goods inventory.

Evaluate the options provided: Direct labor incurred during production and direct materials used in production are part of the manufacturing costs that contribute to the finished goods inventory. Selling and administrative expenses are excluded as they are not part of production costs.

Conclude that the correct answer is 'Cost of completed products not yet sold,' as this represents the finished goods inventory under both perpetual and periodic inventory systems.