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 cost of selling merchandise on account under both perpetual and periodic inventory systems?

Purchase discounts

Freight-in

Inventory shrinkage

Bad debt expense

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Verified step by step guidance

Understand the context of the problem: The question is asking about costs associated with selling merchandise on account under both perpetual and periodic inventory systems. Selling merchandise on account means the seller allows the buyer to pay at a later date, creating accounts receivable.

Review the options provided: Purchase discounts, freight-in, inventory shrinkage, and bad debt expense. Each term represents a different type of cost or adjustment in accounting. We need to determine which one is relevant to selling merchandise on account.

Clarify the concept of bad debt expense: Bad debt expense arises when a company sells goods on account and later determines that some customers will not pay their outstanding balances. This is a cost directly related to selling on account, as it reflects the risk of uncollectible accounts receivable.

Analyze the other options: Purchase discounts are reductions in the cost of inventory due to early payment, freight-in refers to transportation costs for acquiring inventory, and inventory shrinkage represents losses due to theft or damage. None of these are directly tied to selling merchandise on account.

Conclude that bad debt expense is the correct answer because it is the cost associated with the risk of uncollectible accounts receivable, which applies under both perpetual and periodic inventory systems.