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

In a perpetual inventory system, standard costs are used in the calculation of which of the following?

Total sales revenue for the period

Accounts receivable balances

Cost of Goods Sold at the time of each sale

Ending inventory only at the end of the period

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Verified step by step guidance

Understand the perpetual inventory system: In this system, inventory records are updated continuously to reflect purchases and sales. It contrasts with a periodic inventory system, where updates occur at the end of a period.

Recognize the role of standard costs: Standard costs are predetermined estimates of the cost of goods sold (COGS) and inventory, used for budgeting and performance evaluation.

Identify the connection between standard costs and COGS: In a perpetual inventory system, standard costs are applied to calculate the cost of goods sold at the time of each sale. This ensures that the inventory and COGS are updated in real-time.

Clarify why standard costs are not used for other options: Standard costs are not directly used to calculate total sales revenue, accounts receivable balances, or ending inventory at the end of the period. These items are determined by other factors, such as sales prices and actual transactions.

Conclude the application: The correct answer is that standard costs are used to calculate the Cost of Goods Sold at the time of each sale in a perpetual inventory system, ensuring accurate and timely financial reporting.