Question 1

Even in a perpetual inventory system,the business must count its inventory at least once in a year.

Accepted Answer

Even with a perpetual inventory system, which continuously tracks inventory transactions, physical inventory counts are necessary at least annually to verify actual stock levels and adjust for discrepancies due to theft, loss, or errors in tracking.

Question 2

An invoice is also known as a bill.

Accepted Answer

This is true. An invoice and a bill refer to the same document that provides a list of goods or services provided and the amount owed by the customer.

Question 3

An invoice can be either a sales invoice or a purchase invoice.

Accepted Answer

This is true. A sales invoice is issued by the seller to the buyer to request payment for goods or services provided, whereas a purchase invoice is issued by a supplier to a buyer to request payment for goods or services purchased.

Question 4

Regarding a periodic inventory system,which of the following statements is incorrect?

Accepted Answer

The periodic inventory system is generally used for low-cost goods and not relatively expensive ones. The reason being, it is not feasible to count and track the movement of each and every item on a continuous basis for expensive goods.

Question 5

An invoice is a request for payment from the purchaser.

Accepted Answer

An invoice is a seller's request for payment from the purchaser.

Question 6

The perpetual inventory system keeps a running computerized record of inventory and cost of goods sold.

Accepted Answer

The perpetual inventory system is a method that continuously updates inventory balances to record sales, returns, and inventory levels. It also maintains a running record of the cost of goods sold.

Question 7

City Market,a small-scale grocer,wants to introduce an inventory system to track its inventory.The cash registers are not computer terminals.The perpetual inventory system is most suitable for its operations.

Accepted Answer

The perpetual inventory system is most suitable for stores that have optical-scanning cash registers.

Question 8

List the three steps,in order of occurrence,of the operating cycle of a merchandising business.

Accepted Answer

The answer of List the three steps,in order of occurrence,of...

Question 9

When a company uses a perpetual inventory system,all merchandise transactions are updated as they occur.However,the inventory account may not show the correct balance at all times.

Accepted Answer

In a perpetual inventory system, inventory is constantly updated as transactions occur. However, there may still be discrepancies due to errors in recording or inventory shrinkage that have not been accounted for. Therefore, the inventory account may not always show the correct balance at all times, despite the system being perpetual.

Question 10

List,and briefly discuss,two differences between the income statement of a service company and the income statement of a merchandise company.

Accepted Answer

The answer of List,and briefly discuss,two differences between the income...

Question 11

Provide definitions for the following:

Accepted Answer

The answer of Provide definitions for the following:
 ...

Question 12

Merchandise inventory accounting systems can be broadly categorized into two types.They are ________.

Accepted Answer

Merchandise inventory accounting systems can be categorized into two types- perpetual and periodic systems. In a perpetual inventory system, inventory is constantly monitored and recorded as goods are bought and sold, while in a periodic inventory system, inventory is counted periodically and adjustments are made to the books based on the results. Choice A, C, and D are not accurate categorizations of merchandise inventory accounting systems.

Question 13

For each of the following statements,state whether it applies to a periodic inventory system (periodic)or a perpetual inventory system (perpetual).

Accepted Answer

The answer of For each of the following statements,state whether...

Question 14

Which of the following statements is NOT correct?

Accepted Answer

In a periodic inventory system, merchandise inventory and purchasing systems are not integrated with the records for Accounts Receivable and Sales Revenue. Instead, adjustments are made manually at the end of each accounting period to record the cost of goods sold and update inventory balances.

Question 15

Which of the following is NOT recorded in a modern perpetual inventory system?

Accepted Answer

A perpetual inventory system focuses on tracking the inventory levels and costs, as well as sales and purchases. Timeliness of vendor deliveries is not specifically recorded, as it is not directly related to the inventory levels or costs.

Question 16

In a periodic inventory system,merchandise inventory and purchasing systems are integrated with the records for Accounts Receivable and Sales Revenue.

Accepted Answer

In a perpetual inventory system,merchandise inventory and purchasing systems are integrated with the records for Accounts Receivable and Sales Revenue.

Question 17

In a perpetual inventory system,the physical count of inventory ________,

Accepted Answer

The answer of In a perpetual inventory system,the physical count...

Question 18

In a periodic inventory system,the Cost of Goods Sold account is continuously updated as and when sales occur.

Accepted Answer

A periodic inventory system requires businesses to obtain a physical count of inventory to determine the quantities on hand.

Question 19

In a periodic inventory system,the "cash register" at the store is a computer terminal that records sales and updates inventory records.

Accepted Answer

In a perpetual inventory system,the "cash register" at the store is a computer terminal that records sales and updates inventory records.

Question 20

A modern perpetual inventory system ________.

Accepted Answer

A modern perpetual inventory system achieves better control over inventory by recording transactions in real-time and providing up-to-date inventory data. However, it still requires periodic physical counts to ensure accuracy. The system also records both the quantity and cost of merchandise inventory on hand, and while it is not required by U.S. GAAP, it is considered a best practice for inventory management.

Quiz 5: Merchandising Operations