Multiple Choice
Which of the following statements correctly describes how Cost of Goods Sold (COGS) is determined under the perpetual and periodic inventory systems?
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
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Which of the following is NOT a commonly used inventory costing method under either the perpetual or periodic inventory systems?
A
Weighted Average Cost
B
Specific Revenue Recognition
C
First-In, First-Out (FIFO)
D
Last-In, First-Out (LIFO)
Verified step by step guidance1
Understand the context of inventory costing methods: Inventory costing methods are used to determine the cost of goods sold (COGS) and the value of ending inventory. Common methods include Weighted Average Cost, First-In, First-Out (FIFO), and Last-In, First-Out (LIFO).
Review the options provided: Weighted Average Cost, Specific Revenue Recognition, First-In, First-Out (FIFO), and Last-In, First-Out (LIFO).
Identify the purpose of each method: Weighted Average Cost calculates an average cost for all inventory items. FIFO assumes the oldest inventory is sold first. LIFO assumes the newest inventory is sold first. These are all valid inventory costing methods.
Analyze the term 'Specific Revenue Recognition': This term is not related to inventory costing methods. It pertains to recognizing revenue in accounting, which is a separate concept from inventory costing.
Conclude that 'Specific Revenue Recognition' is NOT a commonly used inventory costing method under either the perpetual or periodic inventory systems, as it does not pertain to inventory valuation.
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