Multiple Choice
Which of the following costs is NOT included in the merchandise inventory account under both perpetual and periodic inventory systems?
141
views
4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
Multiple Choice
Which of the following statements about perpetual and periodic inventory systems is correct?
A
Under the periodic inventory system, inventory records are updated after every purchase and sale.
B
The perpetual inventory system only determines COGS at the end of the accounting period.
C
Under the perpetual inventory system, the Cost of Goods Sold (COGS) is updated continuously with each sale.
D
The periodic inventory system provides real-time information about inventory balances.
Verified step by step guidance1
Understand the key differences between perpetual and periodic inventory systems. The perpetual inventory system updates inventory and Cost of Goods Sold (COGS) continuously with each transaction, while the periodic inventory system updates inventory records and calculates COGS only at the end of the accounting period.
Analyze the first statement: 'Under the periodic inventory system, inventory records are updated after every purchase and sale.' This is incorrect because the periodic system does not update inventory records continuously; it updates them periodically, typically at the end of the accounting period.
Evaluate the second statement: 'The perpetual inventory system only determines COGS at the end of the accounting period.' This is incorrect because the perpetual system updates COGS continuously with each sale, providing real-time information.
Review the third statement: 'Under the perpetual inventory system, the Cost of Goods Sold (COGS) is updated continuously with each sale.' This is correct because the perpetual system tracks inventory and COGS in real-time.
Assess the fourth statement: 'The periodic inventory system provides real-time information about inventory balances.' This is incorrect because the periodic system does not provide real-time updates; inventory balances are determined at the end of the accounting period.
Related Videos
Related Practice
