If a Government Uses a Perpetual Inventory System for Its

question 46

Multiple Choice

If a government uses a perpetual inventory system for its General Fund and there is an inventory overage at the end of the year, the inventory asset account should

• A) Be increased and the expenditure account decreased.
• B) Be decreased and the expenditure account increased.
• C) Remain the same. The expenditure account will be decreased, offset by an allowance for inventory overage account.
• D) Remain the same. The expenditure account will be increased, offset by an allowance for inventory overage account.

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Definitions:

Sale-or-return

A commercial arrangement where goods are delivered to a buyer who has the right to return the goods if they are not sold, within a stipulated period.

Voidable Title

A legal condition referring to a situation where a title or ownership can be invalidated at the discretion of one party due to certain conditions, such as fraud.

Void

A term applied to a contract that is not valid because its object is illegal or it has some defect that is so serious that it is not a contract.

CIF

Cost, Insurance, and Freight, a term used in international trade that indicates the seller is responsible for covering these expenses until the goods reach the purchaser's specified port of destination.