A Company Using the Periodic Inventory System Has Inventory Costing

question 188

Multiple Choice

A company using the periodic inventory system has inventory costing $210 on hand at the beginning of a period. During the period, merchandise costing $635 is purchased. At year-end, inventory costing $160 is on hand. The cost of goods sold for the year is

• A) $795
• B) $685
• C) $265
• D) $635

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Definitions:

Accrual

An accounting principle that recognizes revenues and expenses when they are incurred, regardless of when cash transactions occur.

Adjusting Journal Entries

Entries made at the end of an accounting period to update balances of revenues and expenses to reflect the correct amounts earned or incurred during a period.

Accrual

A financial recording approach that logs income and expenditures at the time they occur, irrespective of the actual cash transaction timing.

Adjusting Journal Entry

A type of journal entry made at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred.