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 inventory system provides the most accurate and up-to-date Cost of Goods Sold (COGS) figure for use in Cost-Volume-Profit (CVP) analysis calculations?

Periodic inventory system

Specific identification method

Weighted average method (periodic)

Perpetual inventory system

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Verified step by step guidance

Understand the concept of inventory systems: Inventory systems are methods used to track and manage inventory levels and calculate the Cost of Goods Sold (COGS). The two main types are the periodic inventory system and the perpetual inventory system.

Learn about the periodic inventory system: In this system, inventory levels and COGS are updated at specific intervals, such as monthly or annually. It does not provide real-time updates, which can lead to less accurate and timely COGS figures.

Understand the perpetual inventory system: This system continuously updates inventory records and COGS in real-time as transactions occur. It provides the most accurate and up-to-date COGS figures, making it ideal for Cost-Volume-Profit (CVP) analysis.

Compare the specific identification and weighted average methods: These methods are used to assign costs to inventory items. While they can be used in both periodic and perpetual systems, they do not inherently provide real-time updates unless paired with a perpetual system.

Conclude why the perpetual inventory system is the best choice: Since CVP analysis relies on accurate and timely COGS figures to assess profitability and decision-making, the perpetual inventory system is the most suitable option for this purpose.