WorksheetsQuiz IKI-9
Total questions: 10
Worksheet time: 5mins
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
