5.2 Define periodic and perpetual inventory systems
1) Most businesses today use the periodic inventory method.
2) Because of innovative and computerized methods of tracking inventory, most businesses today use the perpetual inventory method.
3) The perpetual inventory system keeps a running record of inventory as it is bought and sold.
4) When the perpetual records do not equal the physical count of the inventory, the general ledger is updated with the differences.
5) A useful tool that updates inventory is the:
A) cash register.
B) bar code scanner.
C) price tag on the merchandise.
D) UPC number.
E) bar code.
6) Which financial statement does the Cost of Goods Sold account appear on?
7) How often are physical inventory counts performed?
8) Under the periodic inventory method, when does the company determine the amount of inventory on hand at the end of the period?
9) What accounts are adjusted for any inventory differences that are determined after a physical count is taken?
10) Calculate Cost of Goods Sold with the following information:
Beginning Inventory$135,000
Purchases in the period$400,000
Ending Inventory$145,000
11) Calculate Cost of Goods Available for Sale with the following information`:
Beginning Inventory$125,000
Purchases in the period$360,000
Ending Inventory$114,000
5.3 Journalize transactions for the purchase of inventory
1) Under the perpetual inventory system, the purchase of inventory affects both an asset and the shareholder's equity account.
2) Depending on the inventory system the merchandiser uses, the recording of the purchase and sale of inventory are accounted for differently.
3) The name of the supplier (vendor) is listed in the Accounts Payable subsidiary ledger:
4) Purchase returns reduce the cost of inventory.
5) A debit memorandum is the name of the document that supports the return of the goods to the supplier.
6) If an invoice shows a total of $4,000 with terms 2/10, n/30, the customer may pay $3,920 within 10 days to satisfy the bill.
7) An invoice with the credit terms 3/10, n/30 means that the customer has 3 days to take a 10% discount off of the invoice total.
8) Meranda Corporation purchases $3,500 of inventory on account from Ashley Corporation. The journal entry to record this purchase for Meranda under a perpetual inventory system is:
A) debit Inventory; credit Cash.
B) debit Accounts Payable-Ashley; credit Inventory.
C) debit Inventory; credit Accounts Payable-Meranda.
D) debit Inventory; credit Accounts Payable-Ashley.
E) debit Inventory, credit Shareholder's Equity.
9) Tayler Corporation purchased merchandise from Brandon Corporation for cash. The journal entry for Tayler Corporation under a periodic inventory system will be:
A) debit Inventory; credit Cash.
B) debit Purchases; credit Cash.
C) debit Inventory; credit Accounts Payable-Brandon Corporation.
D) debit Inventory; credit Accounts Receivable-Taylor Corporation.
E) debit Purchases, credit Accounts Payable -Brandon Corporation.
10) A record to keep the amount owed to each supplier is called a(n):
A) accounts receivable subsidiary ledger.
B) accounts payable subsidiary ledger.
C) transportation ledger.
D) general ledger for accounts payable.
E) trial balance.