Quiz IKI-9

What is the main difference between a perpetual inventory system and a periodic inventory system?

• The perpetual system updates inventory only at the end of the period

• The periodic system records each transaction directly

• The perpetual system updates inventory and COGS in real-time

• The periodic system does not require physical inventory recording

• The perpetual system is slower in calculating COGS

In the FIFO method, the items sold first are the items that?

• Were purchased last

• Were purchased first

• Have the lowest price

• Have the highest price

• Have the longest shelf life

In a perpetual system, information about inventory and COGS can be found in?

• Income statement

• Stock card or inventory card

• Statement of changes in equity

• General journal

• Accounts payable ledger

How to calculate the average cost of goods available for sale using the weighted average method?

• Divide the total cost of goods available for sale by the quantity

• Add the initial and final costs of the goods and divide by two

• Use the purchase price of the first item as the average cost

• Use the purchase price of the last item as the average cost

• Use the average price from the previous year

In the LCNRV method, inventory is recorded at the lower of?

• Cost and selling price

• Market price and production cost

• Cost and realizable value

• Purchase price and resale price

• Acquisition price and order price

If the market price of a good falls below its cost, what is the correct accounting treatment?

• Use fixed cost

• Adjust inventory value to the highest cost

• Record inventory at its selling price

• Recognize impairment based on LCNRV

• Wait for the market price to rise again

Why is the perpetual system superior to the periodic system in monitoring inventory?

• Does not require recording individual transactions

• Allows real-time monitoring of inventory value and COGS

• Simpler in recording compared to the periodic system

• Does not require stock cards for recording

• Does not need to record adjustments at the end of the period

FIFO method is generally used because?

• Minimizes tax burden by recording higher COGS

• Adjusts inventory value to changing market values

• Ignores price fluctuations in calculating COGS

• Results in a lower inventory value compared to other methods

• Reflects the physical flow of goods in many industries

In a perpetual system, every time goods are purchased, then?

• COGS does not change until the end of the period

• Inventory and COGS are updated directly in the stock card

• The average cost of goods sold remains the same throughout the period

• Inventory value adjustments are only made at the end of the book

• Inventory will not change until a physical count is done

What is the weighted average method used for?

• To keep inventory values high throughout the period

• To use the latest purchase price as a reference for inventory value

• To increase company profits by lowering COGS

• To set selling prices based on the lowest inventory value

• To simplify the recording of inventory costs