Principles of Accounting
12th Edition
ISBN: 9781133626985
Author: Belverd E. Needles, Marian Powers, Susan V. Crosson
Publisher: Cengage Learning
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Textbook Question
Chapter 6, Problem 1SE
Indicate whether each of the statements that follow is more applicable to a perpetual inventory system, periodic inventory system, or both.
- 1. Inventory figure is not accurate until the balance sheet date.
- 2. Requires a physical count of inventory at end of period.
- 3. No detailed records of the inventory are maintained during the accounting period.
- 4. Continuous records are kept of the quantity of inventory on hand.
- 5. Cost of Goods Sold is calculated only at the end of the accounting period.
- 6. Effective system for managing inventory and thus avoiding running out of stock.
- 7. Is more costly to maintain but may lead to increased sales.
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When a periodic inventory system is used,
a.only revenue is recorded each time a sale is made.
b.only the cost of goods sold is recorded each time a sale is made.
c.only the reduction of inventory is recorded each time a sale is made.
d.None of these choices are corre
When a company that uses the periodic inventory system wants to remove beginning estimated returns inventory, which of the following accounts is debited?
a.Estimated Returns Inventory
b.Cost of Goods Sold
c.Customer Refunds Payable
d.Income Summary
Each statement describes a characteristic of the periodic and/or perpetual inventory systems. Some statements relate to only one system, some statements relate to both systems, and some relate to neither system.
1. At the end of the accounting period, two inventory systems usually must be made in the accounts.
2. Inventory amounts are determined from the detailed inventory records.
3. A physical inventory count rarely, if ever, is taken.
Chapter 6 Solutions
Principles of Accounting
Ch. 6 - Prob. 1DQCh. 6 - Prob. 2DQCh. 6 - Prob. 3DQCh. 6 - Assume a large shipment of uninsured merchandise...Ch. 6 - Prob. 5DQCh. 6 - Prob. 6DQCh. 6 - Prob. 7DQCh. 6 - Indicate whether each of the statements that...Ch. 6 - Prob. 2SECh. 6 - Prob. 3SE
Ch. 6 - Prob. 4SECh. 6 - Prob. 5SECh. 6 - Prob. 6SECh. 6 - Prob. 7SECh. 6 - Prob. 8SECh. 6 - Record the following transactions using T...Ch. 6 - Prob. 10SECh. 6 - Prob. 11SECh. 6 - Sutton Hills Companys management made the...Ch. 6 - Prob. 2EACh. 6 - A company has the following data: net sales,...Ch. 6 - Prob. 4EACh. 6 - Prob. 5EACh. 6 - Linear Company engaged in the following...Ch. 6 - Prob. 7EACh. 6 - Prob. 8EACh. 6 - Prob. 9EACh. 6 - Prob. 10EACh. 6 - Prob. 11EACh. 6 - Prob. 12EACh. 6 - Prob. 13EACh. 6 - Prob. 14EACh. 6 - Prob. 15EACh. 6 - Matuska Tools Corporations income statements...Ch. 6 - Selected accounts from Murrays Furniture Stores...Ch. 6 - Prob. 3PCh. 6 - Selected accounts from Dences Gourmet Shops...Ch. 6 - Prob. 5PCh. 6 - Teague Company engaged in the following...Ch. 6 - Prob. 7APCh. 6 - Prob. 8APCh. 6 - Prob. 9APCh. 6 - Prob. 10APCh. 6 - Prob. 11APCh. 6 - Prob. 12APCh. 6 - Prob. 1CCh. 6 - Prob. 2CCh. 6 - Prob. 3CCh. 6 - Prob. 4CCh. 6 - Prob. 5CCh. 6 - Prob. 6C
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- Indicate the effect of each of the following errors on the following balance sheet and income statement items for the current and succeeding years: beginning inventory, ending inventory, accounts payable, retained earnings, purchases, cost of goods sold, net income, and earnings per share. a. The ending inventory is overstated. b. Merchandise purchased on account and received was not recorded in the purchases account until the succeeding year although the item was included in inventory of the current year. c. Merchandise purchased on account and shipped FOB shipping point was not recorded in either the purchases account or the ending inventory. d. The ending inventory was understated as a result of the exclusion of goods sent out on consignment.arrow_forwardErrors A company that uses the periodic inventory system makes the following errors: 1. It omits a purchase on credit from the purchases account and the ending inventory. 2. It omits a purchase on credit from the purchases account, but the ending inventory is correct. 3. It overstates the ending inventory, but purchases arc correct. Required: Indicate the effect of the preceding errors on the income statement and the balance sheet of the current and succeeding years.arrow_forwardPrepare Journal entries to record the following transactions, assuming perpetual inventory updating, and last-in, first-out (LIFO) cost allocation. Assume no beginning inventory.arrow_forward
- The following are independent errors made by a company that uses a periodic inventory system: a. failure to record a purchase of inventory on credit (however, inventory was properly counted at the end of the period) b. expensing the purchase of a machine c. failure to accrue wages d. failure to record an allowance for uncollectibles e. including collections in advance as revenue f. including payments in advance as expenses g. failure to accrue warranty costs h. discount on a note payable issued for purchase of a machine is ignored i. failure to record depreciation expense on assets purchased during the year Required: Next Level Indicate the effect of each of the preceding errors on the companys assets, liabilities, shareholders equity, and net income in the year in which the error occurs. State whether the error causes an overstatement (+), an understatement (), or no effect (NE).arrow_forwardHow long does it take an inventory error affecting ending inventory to correct itself in the financial statements? Explain.arrow_forwardAssume 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_forward
- Prepare journal entries to record the following transactions, assuming perpetual inventory updating and first-in, first-out (FIFO) cost allocation. Assume no beginning inventory.arrow_forwardThis type of inventory system does not require an entry to Merchandise Inventory until a physical inventory has been taken. a. Periodic inventory system b. Perpetual inventory system c. Merchandise inventory system d. Beginning inventory system e. Ending inventory systemarrow_forwardWhich of the following describes features of a perpetual inventory system? A. Technology is normally used to record inventory changes. B. Merchandise bought is recorded as purchases. C. An adjusting journal entry is required at year end, to match physical counts to the asset account. D. Inventory is updated at the end of the period.arrow_forward
- Perpetual 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_forwardRules of debit and credit for periodic inventory accounts Complete the following table by indicating for A through G whether the proper answer is debit or credit:arrow_forwardWhat is the difference in reporting requirements for customer-returned merchandise in sellable condition under a perpetual inventory system versus a periodic inventory system?arrow_forward
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