Question

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1. Which of the following is a characteristic of a perpetual inventory system? A) Inventory purchases are debited to a Purchases account. B) Inventory records are not kept for every item. C) Cost of goods sold is recorded with each sale. D) Cost of goods sold is determined as the amount of purchases less the change in inventory 2. Where should goods in transit that were recently purchased f.o.b. destination be included on the balance sheet? A) Accounts payable. B) Inventory. C) Equipment. D) Not on the balance sheet. 3. Goods on consignment are A) included in the consignee's inventory. B) included in the consignor's inventory. C) included in the consignee's revenue. D) included in both the consignee's and the consignor's inventory. b. 4. Which inventory costing method most closely approximates current cost for each of the following: Ending Inventory Cost of Goods Sold FIFO FIFO FIFO LIFO obali LIFO FIFO Obor SDS LIFO LIFOOD А) а В) ь C) с D) d D ahlgrooglada O d blad mo D u 000, svo 000, 0 0 Page 1

Answer 1

1) Ans: C) cost of goods sold is recorded with each sale

Explanation:

(A) Inventory Purchase are debited to inventory account hence option (a) is incorrect.

(B) Inventory records are kept for each and every transaction ,therefore ( b) is also incorrect.

( D) Cost of good sold is debited which shows increase, and at the same time inventory is credited which represents decrease. So ( d) is also incorrect.

(C) In perpetual inventory system each and every transaction is recorded, therefore it is only correct option.

2) Ans ( D) not on the balance sheet

( Its not included in balance sheet as the title is passed to the buyer at the shipping point.)

3) ( B) included in consignor's inventory

( goods on consignment are included in seller's inventory i.e consignor)

4) ( B) b

FIFO	approximates ending inventory
LIFO	approximates cost of good sold