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 NOT included in the merchandise inventory account under both perpetual and periodic inventory systems?

Purchase returns

Sales commissions

Freight-in costs

Purchase discounts

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Verified step by step guidance

Understand the concept of merchandise inventory: Merchandise inventory includes all costs necessary to acquire goods and prepare them for sale. These costs are recorded under the inventory account in both perpetual and periodic inventory systems.

Review the costs listed in the problem: The costs mentioned are purchase returns, sales commissions, freight-in costs, and purchase discounts. Determine which of these costs are directly related to acquiring and preparing inventory for sale.

Analyze each cost: Purchase returns and purchase discounts reduce the cost of inventory, while freight-in costs are added to the inventory cost as they are necessary to bring the goods to the location of sale. Sales commissions, however, are not related to acquiring inventory but are considered a selling expense.

Clarify the distinction: Selling expenses, such as sales commissions, are recorded separately from inventory costs because they are incurred after the inventory is ready for sale and are related to the selling process rather than the acquisition of goods.

Conclude: Sales commissions are not included in the merchandise inventory account under either perpetual or periodic inventory systems because they are classified as selling expenses, not inventory costs.