Using a Perpetual Inventory System, If Shediac Video Store's Accounting

question 24

Multiple Choice

Using a perpetual inventory system, if Shediac Video Store's accounting records show an ending inventory balance of $25,000 and a physical count shows a balance of $23,000, it is necessary to

• A) debit its inventory records.
• B) purchase additional inventory.
• C) remove the nonexistent inventory from its records.
• D) credit Cost of Goods Sold.

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Definitions:

Variable Costing

An accounting method that only considers variable costs (costs that change with production volume) in product costing and in the calculation of net income.

Absorption Costing

A method of product costing that includes all manufacturing costs, both variable and fixed, in the cost of a product.

Direct Labor Cost

The wages and related benefits paid to workers who are directly involved in the production of goods or services.

Reconciliation

The process of ensuring that two sets of records (usually the balances of two accounts) are in agreement.