Question

Which accounting rule serves as the primary basis for the lower-of-cost-or-market methodology for inventory valuation?

A.conservatism

B.optimism

C.pessimism

D.consistency

Which type or types of inventory timing system (periodic or perpetual) requires the user to record two journal entries every time a sale is made.

A.Periodic

B.Perpetual

C.Both periodic and perpetual

D.Neither periodic nor perpetual

Which of these statements is false?

A.Goods available for sale - Beginning inventory = Purchases

B.If cost of goods sold is incorrect, ending inventory is usually incorrect too.

C.Ending Inventory + Cost of goods sold = Goods available for sale

D.Beginning Inventory + Purchases = Cost of goods sold

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.

Answer 1

1. Option A As per conservatism principle in accounting, inventory should be recorded at their cost or market whichever is Lower

2. Option B Perpetual inventory system requires two journal entries to record a sale. One for sale and another for cost of goods sold (to update inventory)

3. Option D Beginning inventory + Purchases = Cost of Goods available for sale

4. Option A Each sale transaction updates inventory under perpetual inventory system. Hence the software is required for such a tedious task.