Taking a physical count of inventory is not necessary when a periodic inventory system is used should be done near year-end has no internal control relevance is not necessary when a perpetual inventory system is used

Taking a physical count of inventory is not necessary when a periodic inventory system is used should be done near year-end has no internal control relevance is not necessary when a perpetual inventory system is used

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter10: Inventory

Section: Chapter Questions

Problem 11MC: Which of the following describes features of a perpetual inventory system? A. Technology is normally...

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Taking a physical count of inventory
is not necessary when a periodic inventory system is used
should be done near year-end
has no internal control relevance
is not necessary when a perpetual inventory system is used

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Errors 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.
Which of the following financial statements would be impacted by a current-year ending inventory error, when using a periodic inventory updating system? A. balance sheet B. income statement C. neither statement D. both statements
Which 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.
An understatement of ending inventory in the year 20-1 will cause the owners equity account at the end of the year 20-2, assuming no other errors, to be (a) understated. (b) correctly stated. (c) overstated. (d) none of the above.
An understatement of ending inventory in the year 20-1 will cause net income to be overstated in the year 20-2, assuming no other errors.
Prepare Journal entries to record the following transactions, assuming perpetual inventory updating, and last-in, first-out (LIFO) cost allocation. Assume no beginning inventory.
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.
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).
Errors As controller of Lerner Company, which uses a periodic inventory system, you discover the following errors in the current year: 1. Merchandise with a cost of 17,500 was properly included in the final inventory, but the purchase was not recorded until the following year. 2. Merchandise purchases are in transit under terms of FOB shipping point. They have been excluded from the inventory, but the purchase was recorded in the current year on the receipt of the invoice of 4,300. 3. Goods out on consignment have been excluded from inventory. 4. Merchandise purchases under terms FOB shipping point have been omitted from the purchases account and the ending inventory. The purchases were recorded in the following year. 5. Goods held on consignment from Talbert Supply Co. were included in the inventory. Required: For each error, indicate the effect on the ending inventory and the net income for the current year and on the net income for the following year.
Prepare journal entries to record the following transactions, assuming perpetual inventory updating and first-in, first-out (FIFO) cost allocation. Assume no beginning inventory.
Taking a physical count of inventory a.is not necessary when a periodic inventory system is used b.should be done near year-end c.has no internal control relevance d.is not necessary when a perpetual inventory system is used
Which of the following documents is not often used for inventory control? Vendor's invoice Sales receipt Receiving report Purchase order With a perpetual inventory system, when should a physical count of inventory be taken? Near year-end Mid-year Never; a physical count is not needed with a perpetual inventory system Weekly