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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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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.

To determine

Concept introduction:

Periodic Inventory System:

The periodic inventory system records and updates the inventory at the end of a particular period. The inventory balance is not updated after each transaction and it is updated periodically.

Perpetual Inventory System:

The perpetual inventory system records and updates the inventory after each and every transaction. The inventory balance is updated after each transaction and it is kept up to date at every time.

To indicate:

The correct statement for each of the option given:

Statement # Option
1 b. Periodic Inventory System
2 a. Perpetual Inventory System
3 a. Perpetual Inventory System
4 b. Periodic Inventory System
5 b. Periodic Inventory System
6 a. Perpetual Inventory System
7 c. Both perpetual and periodic Inventory Systems
Explanation

The periodic inventory system records and updates the inventory at the end of a particular period. The inventory balance is not updated after each transaction and it is updated periodically.

The perpetual inventory system records and updates the inventory after each and every transaction. The inventory balance is updated after each transaction and it is kept up to date at every time. The correct statement for each of the option given is explained as follow:

Statement # Option
1 b...

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