Principles of Financial Accounting.
24th Edition
ISBN: 9781260158601
Author: Wild
Publisher: MCG
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Textbook Question
Chapter 5, Problem 16QS
Contrasting periodic and perpetual systems
Identify whether each description best applies to a periodic or a perpetual inventory system.
______ a. Updates the inventory account only at period-end.
______ b. Requires an
______ c. Markedly increased in frequency and popularity in business within the past decade.
______ d. Records cost of goods sold each time a sales transaction occurs.
______ e. Provides more timely information to managers.
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Identify whether each description best applies to a periodic or a
perpetual inventory system.
Provides more timely information to managers.
Choose. +
Updates the inventory account only at period-end.
Choose. +
Requires an adjusting entry to record inventory shrinkage.
Choose.
Returns immediately affect the account balance of Merchandise Inventory
Choose. +
Records cost of goods sold each time a sales transaction occurs.
Choose. +
1. Under the perpetual inventory system, the Cost of Good Sold account is recorded …
a. When purchases occur
b. On a monthly basis
c. When sales occur
d. On an annual basis
2. Which of the following equations is false?
a. Net Income = Gross Profit – Operating Expenses
b. COGS = Cost of Goods Available for Sale – Ending Inventory
c. Sales Revenue – COGS – Operating Expenses = Net Income
d. Net Income = Operating Expenses + Gross Profit
3. Pinkan Company sells merchandise to Castle Corporation with terms FOB Shipping Point. In this case, the freight cost will be paid by …
a. Pinkan Company
b. Castle Corporation
c. Shipping Company
d. Pinkan Company and Castle Corporation
4. During 2020, Pearl Enterprises generated sales revenues of $85,000. The company’s expenses were as follows: cost of goods sold of $30,000, operating expenses of
$13,000 and a loss on the sale of equipment of $9,000. Pearl’s gross profit is …
a. $55,000
b. $42,000
c. $33,000
d. $64,000
5.…
Which of the following is a true statement about inventory systems?
A perpetual system determines cost of goods sold only at the end of the accounting period.
Periodic inventory systems require more detailed inventory records.
A periodic system requires cost of goods sold be determined after each sale.
Perpetual inventory systems require more detailed inventory records.
Chapter 5 Solutions
Principles of Financial Accounting.
Ch. 5 - Prob. 1MCQCh. 5 - Prob. 2MCQCh. 5 - Prob. 3MCQCh. 5 - Prob. 4MCQCh. 5 - A companys net sales are 675,000, its cost of...Ch. 5 - Prob. 1DQCh. 5 - In comparing the accounts of a merchandising...Ch. 5 - Prob. 3DQCh. 5 - Prob. 4DQCh. 5 - How does a company that uses a perpetual inventory...
Ch. 5 - Distinguish between cash discounts and trade...Ch. 5 - Prob. 7DQCh. 5 - Prob. 8DQCh. 5 - Prob. 9DQCh. 5 - What is the difference between the single-step and...Ch. 5 - APPLE Refer to the balance sheet and income...Ch. 5 - Prob. 12DQCh. 5 - Prob. 13DQCh. 5 - Prob. 14DQCh. 5 - Prob. 15DQCh. 5 - QUICK STUDY Applying merchandising terms C1 P1...Ch. 5 - Identifying inventory costs Costs of 5,000 were...Ch. 5 - Prob. 3QSCh. 5 - Question: Compute the amount to be paid for each...Ch. 5 - Recording purchases, returns, and discounts taken...Ch. 5 - Prob. 6QSCh. 5 - Prob. 7QSCh. 5 - Prob. 8QSCh. 5 - Accounting for shrinkageperpetual system P3 Nix'It...Ch. 5 - Closing entries P3 Refer to QS 4-9 and prepare...Ch. 5 - Prob. 11QSCh. 5 - Prob. 12QSCh. 5 - Prob. 13QSCh. 5 - Computing and interpreting acid-test ratio Use the...Ch. 5 - Prob. 15QSCh. 5 - Contrasting periodic and perpetual systems...Ch. 5 - Prob. 17QSCh. 5 - Prob. 18QSCh. 5 - Prob. 19QSCh. 5 - Prob. 20QSCh. 5 - Prob. 21QSCh. 5 - Prob. 22QSCh. 5 - Prob. 23QSCh. 5 - Prob. 1ECh. 5 - Prob. 2ECh. 5 - Prob. 3ECh. 5 - Prob. 4ECh. 5 - Recording purchases, purchases returns, and...Ch. 5 - Recording sales, purchases. and cash...Ch. 5 - Prob. 7ECh. 5 - Inventory and cost of sales transactions in...Ch. 5 - Prob. 9ECh. 5 - Prob. 10ECh. 5 - Prob. 11ECh. 5 - Impacts of inventory error on key accounts P3 A...Ch. 5 - Impacts of inventory error on key accounts P3 A...Ch. 5 - Prob. 14ECh. 5 - Prob. 15ECh. 5 - Prob. 16ECh. 5 - Recording purchases, returns, and allowances...Ch. 5 - Recording sales, purchases, and cash...Ch. 5 - Prob. 19ECh. 5 - Prob. 20ECh. 5 - Recording estimates of future returns P6 Chico...Ch. 5 - Prob. 22ECh. 5 - Recording sates, purchases. shipping. and...Ch. 5 - Recording purchases, sales, returns, and...Ch. 5 - Prob. 25ECh. 5 - Preparing journal entries for merchandising...Ch. 5 - Prob. 2APCh. 5 - Prob. 3APCh. 5 - Prob. 4APCh. 5 - Prob. 5APCh. 5 - Preparing journal entries for merchandising...Ch. 5 - Prob. 2BPCh. 5 - Prob. 3BPCh. 5 - Prob. 4BPCh. 5 - The following unadjusted trial balance is prepared...Ch. 5 - This serial problem began in Chapter 1 and...Ch. 5 - Prob. 1AACh. 5 - Prob. 2AACh. 5 - Prob. 3AACh. 5 - Prob. 1BTNCh. 5 - You are the financial officer for Music Plus, a...Ch. 5 - Prob. 3BTNCh. 5 - Prob. 5BTN
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- Under the periodic inventory system, what account is credited when an estimate is made for sales made this year, but expected to be returned next year? (a) Merchandise Inventory (b) Customer Refunds Payable (c) Sales (d) Sales Returns and Allowancesarrow_forwardUse the last-in, first-out (LIFO) cost allocation method, with perpetual inventory updating, to calculate (a) sales revenue, (b) cost of goods sold, and c) gross margin for A75 Company, considering the following transactions.arrow_forwardUnder the periodic inventory system, what account is debited when an estimate is made for sales made this year, but expected to be returned next year? (a) Sales Returns and Allowances (b) Merchandise Inventory (c) Customer Refunds Payable (d) Salesarrow_forward
- Use the first-in, first-out (FIFO) cost allocation method, with perpetual inventory updating, to calculate (a) sales revenue, (b) cost of goods sold, and c) gross margin for A75 Company, considering the following transactions.arrow_forwardUnder the periodic inventory system, what account is debited when an estimate is made for the cost of merchandise inventory sold this year, but expected to be returned next year? (a) Estimated Returns Inventory (b) Sales Returns and Allowances (c) Merchandise Inventory (d) Customer Refunds Payablearrow_forwardPerpetual and Periodic Inventory Systems Below is a list of inventory systems options. a. Perpetual inventory system b. Periodic inventory system c. Both perpetual and periodic inventory systems Required: Match each option with one of the following: 1. Only revenue is recorded as sales are made during the period; the cost of goods sold is recorded at the end of the period. 2. Cost of goods sold is determined as each sale is made. 3. Inventory purchases are recorded in an inventory account. 4. Inventory purchases are recorded in a purchases account. 5. Cost of goods sold is determined only at the end of the period by subtracting the cost of ending inventory from the cost of goods available for sale. 6. Both revenue and cost of goods sold are recorded during the period as sales are made. 7. The inventory is verified by a physical count.arrow_forward
- Assume that the business in Exercise 6-9 maintains a perpetual inventory system. Determine the cost of goods sold for each sale and the inventory balance after each sale, assuming the last-in, first-out method. Present the data in the form illustrated in Exhibit 4.arrow_forwardComplete the missing piece of information involving the changes in inventory, and their relationship to goods available for sale, for the two years shown:arrow_forwardUse the last-in, first-out method (LIFO) cost allocation method, with perpetual inventory updating, to calculate (a) sales revenue, (b) cost of goods sold, and c) gross margin for B75 Company, considering the following transactions.arrow_forward
- Perpetual versus Periodic Inventory Systems Graham Company is trying to select an inventory system. Below are several statements that pertain to inventory systems. 1. Cost of goods sold is only determined at the end of the period after a physical count of inventory. 2. A physical count of inventory is performed. 3. Purchases of inventory are recorded in a purchases account. 4. Cost of goods sold is determined continually during the period as sales are made. 5. Greater control over inventory is possible. 6. This inventory system is relatively inexpensive to operate. Required: Select the inventory system, perpetual or periodic, that is best represented by each statement. If the statement applies to both systems, select both.arrow_forwardAssume that the business in Exercise 7-9 maintains a perpetual inventory system. Determine the cost of merchandise sold for each sale and the inventory balance after each sale, assuming the last-in, first-out method. Present the data in the form illustrated in Exhibit 4.arrow_forwardWhich of the following is an advantage of the periodic inventory system? A. frequent physical inventory counts B. cost prohibitive C. time consuming D. real-time information for managersarrow_forward
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