Learning Objective 5-2
1) The perpetual inventory method is a method of record keeping that ________.
A) maintains a constant record of the inventory balance
B) updates the inventory records only at the end of the accounting period
C) can be used only in a computerized accounting system
D) involves calculating cost of goods sold only at the end of the period
2) The periodic inventory method is a method of record keeping that ________.
A) maintains a constant record of the inventory balance
B) updates the inventory records only when a sale is made
C) can be used only in a computerized accounting system
D) involves calculating cost of goods sold only at the end of the period
3) Which of the following is an advantage of a perpetual inventory system over a periodic system?
A) Cost of goods sold will be less.
B) Sales will be greater.
C) Inventory shrinkage is separately identified.
D) Sales returns will be less.
4) Two systems of inventory record keeping are ________.
A) periodic and perpetual
B) computerized and database
C) purchase returns and purchase discounts
D) merchandising and manufacturing
5) How does a perpetual inventory system differ from a periodic system?
A) Sales are increased only at the end of the accounting period in a perpetual system.
B) Cost of goods sold is increased only after an inventory count in a perpetual system.
C) Inventory is reduced after each sale in a perpetual system.
D) Inventory is increased after each sale in a periodic system.
6) In which way is a perpetual inventory system similar to a periodic system?
A) Sales are increased at the time of sale.
B) Cost of goods sold is increased after an inventory count.
C) Inventory is reduced after each sale.
D) Cost of goods sold is increased after each sale.
7) With a perpetual inventory system, cost of goods sold is calculated only when the firm is ready to prepare financial statements.
8) The periodic inventory system is a record keeping system that involves calculating cost of goods sold only at the end of the period.
9) A company that uses a perpetual inventory system must calculate cost of goods sold each time it records a sale.
10) Compare and contrast the perpetual and periodic inventory systems.