Under a Perpetual Inventory System

question 4

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:

Captive Financial Lease

A leasing arrangement where the lessor is owned by or closely affiliated with the company that manufactures or sells the leased asset, often used to finance purchases from the parent company.

Sale and Leaseback

A financial transaction where an entity sells an asset and immediately leases it back from the buyer, allowing the seller to continue using the asset while freeing up capital.

Leasing Reasons

The motives or considerations for choosing to lease assets, such as financial flexibility, tax advantages, or capital preservation.

Lease-Buy Analysis

A financial comparison used to decide whether to lease or buy an asset based on cost effectiveness over the asset's useful life.