Under a Perpetual Inventory System

question 22

Multiple Choice

Under a perpetual inventory system

• A)there is no need for a year-end physical count.
• B)increases in inventory resulting from purchases are debited to Purchases.
• C)accounting records continuously disclose the amount of inventory.
• D)the account Purchase Returns and Allowances is credited when goods are returned to vendors.

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Definitions:

Substitution Effect

An alteration in consumer choice between two goods when the price of one good changes relative to the price of another, influencing the allocation of their budget.

Income Effect

The relationship between changing income in a person's life or the economy and the subsequent demand for certain goods or services.

Perfect Substitutes

Goods for which consumers are willing to replace one for the other at a constant rate, without affecting their level of utility.

Substitution Effect

The change in consumption patterns due to a change in relative prices, leading consumers to substitute one product for another.