Sales revenue is generated by the sale of inventory. Companies can choose between the perpetual and the periodic system to account for the inventory. Please discuss the difference between the two accounting processes and explain how one would be the best choice for a company that makes Televisions. Discuss the reason why one accounting method might be preferred over the other or could both be used properly for a company that makes televisions. What factors were used to determine the best choice supporting your selection. In your discussion, provide another product that would best be accounted for using the system you did not select and explain what features of the product or merchandise, in your opinion, are the drivers for the opposite method.

Sales revenue is generated by the sale of inventory. Companies can choose between the perpetual and the periodic system to account for the inventory. Please discuss the difference between the two accounting processes and explain how one would be the best choice for a company that makes Televisions. Discuss the reason why one accounting method might be preferred over the other or could both be used properly for a company that makes televisions. What factors were used to determine the best choice supporting your selection. In your discussion, provide another product that would best be accounted for using the system you did not select and explain what features of the product or merchandise, in your opinion, are the drivers for the opposite method.

Name: Sales revenue is generated by the sale of inventory. Companies can ch
Uploaded: 2024-03-20T06:32:37.000Z
Channel: Bartleby
Description: Sales revenue is generated by the sale of inventory. Companies can choose between the perpetual and the periodic system to accountfor the inventory. Please discuss the difference between the two accounting processes and explain how one would be the

Financial Accounting

15th Edition

ISBN:9781337272124

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter7: Inventories

Section: Chapter Questions

Problem 3E: Beginning inventory, purchases, and sales data for portable game players are as follows: The...

See similar textbooks

Similar questions

Beginning inventory, purchases, and sales data for portable game players are as follows: The business maintains a perpetual inventory system, costing by the first-in, first-out method. a. Determine the cost of the merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 3. b. Based upon the preceding data, would you expect the inventory to be higher or lower using the last-in, first-out method?
You have decided to open up a small convenience store in your hometown. As part of the initial set-up process, you need to determine whether to use a perpetual inventory system or a periodic inventory system. Write an evaluation paper comparing the perpetual and periodic inventory systems. Describe the benefits and challenges of each system as it relates to your industry and to your business size. Compare at least one example transaction using the perpetual and periodic inventory systems (a purchase transaction, for example). Research and describe the impact each system has on your financial statements. Decide which system would be the best fit for your business, and support your decision with research.
A company is trying to set up proper internal controls for their accounts payable/inventory purchasing system. Currently the purchase order is generated by the same person who receives the inventory. Together the purchase order and the receiving ticket are sent to accounts payable for payment. What changes would you make to improve the internal control structure? A. No changes would be made since the person paying the bills is different from the person ordering the inventory. B. The person in accounts payable should generate the purchase order. C. The person in accounts payable should generate the receiving ticket once the invoice from the supplier is received. D. The responsibilities of generating the purchase order and receiving the inventory should be separated among two different people.
Sales revenue is generated by the sale of inventory. Companies can choose between the perpetual and the periodic system to account for the inventory. Please discuss the difference between the two accounting processes and explain how one would be the best choice for a company that makes Televisions. Discuss the reason why one accounting method might be preferred over the other or could both be used properly for a company that makes televisions. What factors were used to determine the best choice supporting your selection. Provide another product that would best be accounted for using the system you did not select and explain what features of the product or merchandise, in your opinion, are the drivers for the opposite method.
In comparing the accounts of a merchandising company with those of a service company, what additional accounts would the merchandising company likely use, assuming it employs a perpetual inventory system? Which financial statements would these accounts appear on?
The hypothetical flow is one of the methods used to determine the cost of inventory and the cost of goods sold, and assuming that the company uses the perpetual inventory system, discuss this method in detail, supporting your answer with a practical example to determine the cost of goods sold and the cost of inventory and the reasons for the difference in results for each method (FIFO, LIFO?
You may recall from Principles I that “Cost of goods sold” for a retailer is figured as shown below: Beginning inventory+ Purchases= Cost of goods available for sale– Ending inventory= Cost of goods sold (A) How does the “Cost of Goods Sold” section of the income statement differ between merchandising and manufacturing companies and how is it calculated for manufacturing companies? (B) Inventory on the balance sheet is also different for a manufacturing company than for a retailer. What are the three types of inventory on a manufacturer’s balance sheet? After naming all three, select one and discuss it.
If the company had purchased all its materials from the online marketplace, describe what inventory cost would be shown for all materials on hand based on the average transaction price. Explain if the inventory cost value is higher or lower than the value of all materials if using their standard price. If the company can freely choose the lower of the standard price or the average price in the online marketplace, explain what the lowest possible inventory cost of all materials on hand is. Identify whether there is a particular marketplace vendor who always sells at a price lower than the standard price cost of all materials on hand.
Zumiez Inc. is a leading action sports retailer, focusing on skateboarding, snowboarding, surfing,and BMX, selling some of its merchandise under the Blue Tomato brand. The company’s financialstatement notes reported that “Merchandise inventories may include items that have been writtendown to our best estimate of their net realizable value. Our decisions to write-down our merchandise inventories are based on their current rate of sale, the age of the inventory, the profitability ofthe inventory and other factors.” What ratios and financial measure(s) discussed in this chapter isthe company likely using to monitor . . .a. “. . . the current rate of sale”?b. “. . . the age of the inventory”?c. “. . . the profitability of the inventory”?
A merchandising business purchases goods for resale. A merchandiser makes a profit by selling goods at a price higher than the cost of the goods sold. While the underlying business transaction is straightforward, determining of the cost of the merchandise sold often requires an inventory cost flow assumption when similar units are purchased at different units costs during the period. Identify cost flow assumptions to their description: Cost Flow Assumption (choose between FIFO,LIFO, weighted average, or specific identication) Description Cost flow is the reverse order in which the costs were incurred. Cost flow is the order in which the costs were incurred. Cost flow is an average of the purchase costs. Unit cost is identified with a specific purchase Often, specification identification may not be practical, so one of the other three cost flow assumptions is assumed. The cost flow assumption can be applied under either the perpetual or periodic inventory system.
First In, First Out Suppose you are the assistant controller for a retail establishment that is an independent bookseller. The company uses manual, periodic inventory updating, using physical counts at year end, and the FIFO method for inventory costing. How would you approach the subject of whether the company should consider switching to computerized perpetual inventory updating? Can you present a persuasive argument for the benefits of perpetual? Explain.
The management of Milque Corp. is considering the effects of various inventory-costing methods on its financial statements and its income tax expense. Assuming that the price the company pays for inventory is increasing, which method will: (a) provide the highest net income? Select the inventory-costing method that will provide the highest net income (b) provide the highest ending inventory? Select the inventory-costing method that will provide the highest ending inventory (c) result in the lowest income tax expense? Select the inventory-costing method that will result in the lowest income tax expense (d) result in the most stable earnings over a number of years? Select the inventory-costing method that will result in the most stable earnings over a number of years